Index Numbers
OVERVIEW
INDEX NUMBERS compare figures which show changes in a given variable. The most common variables used in index numbers are price and quantity. By getting the difference of the index numbers, we are able to determine the relative or percent change in the price or quantity of a commodity between two periods of time or two localities.
Among the more commonly used index numbers are the consumer price index, retail price index, wholesale price index, and the cost-of-living index.
DEFINITION
An index number is a statistical measure designed to show changes in a variable or group of related variables (price, quantity, value), with respect to time, geographic location, or other characteristics such as income, profession, and the like.
PRICE, QUANTITY, AND VALUE RELATIVES
The simplest kind of index numbers are called relatives: Price relative (PR) Quantity relative (QR) Value relative (VR)
These are the simplest kind because they compare the price, quantity, or value of only one commodity between to time periods or localities.
The formulas are:
PR=Pn/Po
where: Pn = price during a given year Po = price during the base year
QR=Qn/Qo where: Qn = quantity during a given year Qo = quantity during the base year
VR=Vn/Vo
where: Vn = value during a given year Vo = value during the base year
The formula for value relative may be transformed as follows: 4 since value = (price) x (quantity)
INDEX NUMBERS compare figures which show changes in a given variable. The most common variables used in index numbers are price and quantity. By getting the difference of the index numbers, we are able to determine the relative or percent change in the price or quantity of a commodity between two periods of time or two localities.
Among the more commonly used index numbers are the consumer price index, retail price index, wholesale price index, and the cost-of-living index.
DEFINITION
An index number is a statistical measure designed to show changes in a variable or group of related variables (price, quantity, value), with respect to time, geographic location, or other characteristics such as income, profession, and the like.
PRICE, QUANTITY, AND VALUE RELATIVES
The simplest kind of index numbers are called relatives: Price relative (PR) Quantity relative (QR) Value relative (VR)
These are the simplest kind because they compare the price, quantity, or value of only one commodity between to time periods or localities.
The formulas are:
PR=Pn/Po
where: Pn = price during a given year Po = price during the base year
QR=Qn/Qo where: Qn = quantity during a given year Qo = quantity during the base year
VR=Vn/Vo
where: Vn = value during a given year Vo = value during the base year
The formula for value relative may be transformed as follows: 4 since value = (price) x (quantity)
References: Book in Fundamental Statistics (Chapter 13) pp. 293-310 http://financial-dictionary.thefreedictionary.com http://www.emathzone.com/tutorials/basic-statistics 22