This document discusses index numbers, which are used to measure changes in variables like stock prices, cost of living, and production over time. It defines index numbers and describes their key features and characteristics. The document also outlines different types of index numbers, such as simple, composite, price, and quantity indexes. It then explains methods for constructing index numbers, including aggregate and relative methods. The document lists advantages and limitations of using index numbers. Finally, it discusses main problems in constructing index numbers, like defining the purpose and selecting the base year, goods/services, and price type.

1. Types of Index No
STATISTICS
PRESENTED BY-
DEPARTMENT: BACHELOR OF BUSINESS
ADMINISTRATION
YEAR:1ST, SEM:1
NAME: SOUMYAJIT BANERJEE
STUDENT CODE: BWU/BBA/18/020

2. CONTENTS
– WHAT IS INDEX NUMBER?
– FEATURES OF INDEX NUMBER
– CHARACTERISTICS OF INDEX NUMBER
– TYPES OF INDEX NUMBERS
– METHODS OF CONSTRUCTING INDEX NUMBERS
– AGGREGATE METHODS
– RELATIVE METHOD
– ADVANTAGES OF INDEX NUMBER
– LIMITATION OF INDEX NUMBER
– MAIN PROBLEMS IN THE CONSTRUCTION OF INDEX NUMBER

3. WHAT IS INDEX
NUMBER?
– AN INDEX NUMBER IS THE MEASURE
OF CHANGE IN A VARIABLE (OR
GROUP OF VARIABLES) OVER TIME. IT
IS TYPICALLY USED IN ECONOMICS
TO MEASURE TRENDS IN A WIDE
VARIETY OF AREAS INCLUDING:
STOCK MARKET PRICES, COST OF
LIVING, INDUSTRIAL OR
AGRICULTURAL PRODUCTION, AND
IMPORTS. INDEX NUMBERS ARE ONE
OF THE MOST USED STATISTICAL
TOOLS IN ECONOMICS.

4. FEATURES OF INDEX
NUMBER:
– 1. MEASURES OF RELATIVE CHANGES: INDEX
NUMBER MEASURE RELATIVE OR PERCENTAGE
CHANGES IN THE VARIABLE OVER TIME.
– 2. QUANTITATIVE EXPRESSION: INDEX
NUMBERS OFFER A PRECISE MEASUREMENT OF
THE QUANTITATIVE CHANGE IN THE CONCERNED
VARIABLE OVER TIME.
– 3. AVERAGE: INDEX NUMBER SHOW CHANGES IN
TERMS OF AVERAGE.

5. CHARACTERISTICS OF
INDEX NUMBER
– EXPRESSED IN NUMBER: INDEX NUMBER CAN BE EXPRESSED IN NUMBER ONLY, THOUGH THE CHANGES CAN BE
EXPRESSED IN WORDS ALSO, LIKE PRODUCTIONS IS INCREASING, PRICES ARE DECREASING. BUT THE INDEX NUMBER
EXPRESSES THESE CHANGES NUMBERS.
– EXPRESSED ON AN AVERAGE: INDEX NUMBER PRESENTS THE CHANGES ON AN AVERAGE BASES. THESE ARE
GENERALLY USED TO EXPRESS THE CHANGES IN A GROUP OF VARIABLES AND NOT OF A PARTICULAR VARIABLE OR
COMMODITY, IF THE PRICES OF SOME COMMODITIES ARE INCREASING THERE MAY BE AT CONSTANT LEVEL..
– SPECIAL TYPE OF AVERAGE: INDEX NUMBERS ARE OF SPECIAL TYPE OF AVERAGE BECAUSE IN SIMPLE AVERAGE
DATAARE UNIFORM AND THEIR UNITS ARE ALSO EVEN. WHERE IN INDEX NUMBERS THE DATA HAVING DIFFERENT
MEASUREMENT UNITS ARE USED.
– COMPARATIVE NATURE: THE INDEX NUMBERS ARE COMPARATIVE IN NATURE BECAUSE THEY MEASURE RELATIVE
CHANGES AND RELATIVE CHANGES ARE COMPUTED ON THE BASIS OF SOME OTHER DATA SO IT CAN BE SAID THAT
INDEX NUMBERS ARE COMPARATIVE.
– UNIVERSAL UTILITY: GENERALLY INDEX NUMBERS ARE USED TO MEASURE THE CHANGES IN PRICES IN THE GROUP
OF ITEMS BUT THE CHANGES IN THE QUANTITY OF AGRICULTURAL PRODUCTION, INDUSTRIAL PRODUCTION,
IMPORTS, AND EXPORTS CAN ALSO BE MEASURED THROUGH INDEX NUMBERS.

6. TYPES OF INDEX
NUMBERS
• SIMPLE INDEX NUMBER: A SIMPLE INDEX NUMBER IS A NUMBER THAT
MEASURES A RELATIVE CHANGE IN A SINGLE VARIABLE WITH RESPECT TO A
BASE. THESE TYPE OF INDEX NUMBERS ARE CONSTRUCTED FROM A SINGLE
ITEM ONLY.
• COMPOSITE INDEX NUMBER: A COMPOSITE INDEX NUMBER IS A NUMBER
THAT MEASURES AN AVERAGE RELATIVE CHANGES IN A GROUP OF
RELATIVE VARIABLES WITH RESPECT TO A BASE. A COMPOSITE INDEX
NUMBER IS BUILT FROM CHANGES IN A NUMBER OF DIFFERENT ITEMS.
• PRICE INDEX NUMBERS: PRICE INDEX NUMBERS MEASURE THE RELATIVE
CHANGES IN PRICES OF A COMMODITY BETWEEN TWO PERIODS. PRICES CAN
BE EITHER RETAIL OR WHOLESALE. PRICE INDEX NUMBER ARE USEFUL TO
COMPREHEND AND INTERPRET VARYING ECONOMIC AND BUSINESS
CONDITIONS OVER TIME.
• QUANTITY INDEX NUMBERS: THESE TYPES OF INDEX NUMBERS ARE
CONSIDERED TO MEASURE CHANGES IN THE PHYSICAL QUANTITY OF
GOODS PRODUCED, CONSUMED OR SOLD OF AN ITEM OR A GROUP OF ITEMS.

7. METHODS OF
CONSTRUCTING INDEX
NUMBERS

8. AGGREGATE
METHODS

9. RELATIVE METHOD

10. ADVANTAGES OF
INDEX NUMBER
– 1. MEASUREMENT OF CHANGE IN THE PRICE LEVEL OR THE VALUE OF
MONEY: INDEX NUMBER CAN BE USED TO KNOW THE IMPACT OF THE
CHANGE IN THE VALUE OF MONEY ON DIFFERENT SECTIONS OF THE
SOCIETY.
– 2. KNOWLEDGE OF THE CHANGE IN STANDARD OF LIVING: INDEX
NUMBER HELPS TO ASCERTAIN THE LIVING STANDARDS OF PEOPLE. MONEY
INCOME MAY INCREASE BUT IF INDEX NUMBER SHOW A DECREASE IN THE
VALUE IF MONEY. LIVING STANDARD MAY EVEN DECLINE.
– 3. ADJUSTMENT IN SALARIES AND ALLOWANCES: COST OF LIVING INDEX
NUMBER IS A USEFUL GUIDE TO THE GOVERNMENT AND PRIVATE
ENTERPRISES TO MAKE NECESSARY ADJUSTMENT IN SALARIES AND
ALLOWANCES OF THE WORKERS.
– 4. USEFUL TO BUSINESS COMMUNITY: PRICE INDEX NUMBERS SERVE AS A
USEFUL GUIDE TO THE BUSINESS COMMUNITY IN PLANNING.
– 5. INFORMATION REGARDING FOREIGN TRADE: INDEX OF EXPORTS AND
IMPORTS PROVIDES USEFUL INFORMATION REGARDING FOREIGN TRADE.

11. LIMITATION OF INDEX
NUMBER
– 1. NOT COMPLETELY TRUE: INDEX NUMBER NOT FULLY TRUE. THE INDEX
NUMBER SIMPLY INDICATE ARITHMETICAL TENDENCY OF THE TEMPORAL
CHANGES IN THE VARIABLE.
– 2. INTERNATIONAL COMPARISON IS NOT POSSIBLE: DIFFERENT
COUNTRIES HAVE DIFFERENT BASS OF INDEX NUMBERS; THESE DO NOT
HELP INTERNATIONAL COMPARISONS.
– 3. DIFFERENCE OF TIME: WITH THE PASSAGE OF TIME, IT IS DIFFICULT TO
MAKE COMPARISON OF INDEX NUMBER. WITH THE CHANGING TIME MAN’S
HABITS.
– 4. LIMITED USE: INDEX NUMBERS ARE PREPARED WITH CERTAIN SPECIFIC
OBJECTIVE. IF THEY ARE USED FOR ANOTHER PURPOSE THEY MAY LEAD TO
WRONG CONCLUSION.
– 5. LACK OF RETAIL PRICE INDEX NUMBER: MOST OF THE INDEX NUMBERS
ARE PREPARED ON THE BASIS OF WHOLESALER PRICES. BUT IN REAL LIFE,
RETAIL PRICES ARE MOST RELEVANT, BUT IT IS DIFFICULT TO COLLECT
RETAIL PRICES.

12. MAIN PROBLEMS IN THE
CONSTRUCTION OF
INDEX NUMBER:
– 1. PURPOSE OF INDEX NUMBER: THERE ARE VARIOUS TYPES OF INDEX
NUMBER, CONSTRUCTED WITH DIFFERENT OBJECTIVES. BEFORE
CONSTRUCTING AN INDEX NUMBER, ONE MUST DEFINE THE
OBJECTIVE.
– 2. SELECTION OF BASE YEAR: SELECTION OF BASE YEAR IS ANOTHER
PROBLEM IN THE CONSTRUCTION OF INDEX NUMBER. BASE YEAR IS
THE REFERENCE YEAR. IT IS THE YEAR WITH WHICH PRICES OF THE
CURRENT YEAR ARE COMPARED.
– 3. SELECTION OF GOODS AND SERVICES: HAVING DEFINED THE
OBJECTIVE, THE PROBLEM IS OF THE SELECTION OF GOODS OR
SERVICES TO BE INCLUDED IN THE INDEX NUMBER.
– 4. SELECTION OF PRICE: WHETHER WHOLESALE OR RETAIL PRICES
ARE USED IS ALSO A PROBLEM IN CONSTRUCTION OF INDEX NUMBER.

13. THANK YOU