Types of Index Numbers

TYPES OF INDEX NUMBERS

(i) Price Index Numbers

Price index is a ‘Special type’ of average which studies net relative change in the prices of commodities, expressed in different units. Here comparison is made in respect of prices. Price index numbers are wholesale price index numbers and retail price index numbers.

(ii) Quantity Index Numbers

This number measures changes in volume of goods produced, purchased or consumed. Here, the comparison is made in respect of quantity or volume. For example, the volume of agricultural goods produced, consumed, import, export etc.

(iii) Value Index

Value index numbers study the changes in the total value of a certain period with the total value of the base period. For example, the indices of stock-in-made, purchase, sales profit etc., are analysed here.

Note:

The points and precautions that should be taken in the constructing index numbers are:

·              determination of the purpose

·              selection of the base period

·              selection of commodities

·              selection of price quotations

·              selection of appropriate weight

·              selection of an appropriate average

·              selection of an appropriate formula