CHAPTER 11 : INDEX NUMBER EXPRESS NOTES

1. Index Number , I
I= Q1 X 100 Q0

Where Q0 = Quantity at the base year Q1 = Quantity at specific year
Alternative Method: Using Index Box

B as e Y ea r

S pe c ific Y e ar

Q0
a d a p e r k a ta a n 'b a s e ye a r', in d e x n u m b e r o r p ric e i n d e x m e s ti 10 0

Q1 I

ro w fo r Q u a n ti ty, P ri c e e tc r o w fo r p ri c e in d e x, in d ex nu m b e r

100

Q0 Q1 = or Q0 xI =100 Q1 100 I

2. Composite Index,
I =

I

∑I W ∑W
i i

i

where Ii = Price Index Wi = weightage

S2FO2R – Search, Strategy, Formula, Operation, Output, Re-check

Q1: The mean electric bill of Ali increases from RM420 a month in 2006 to RM630 a month in 2009. Calculate the index number of the electric bill of Ali in 2009 based on 2006.
20 06 20 09

Q1

40 2 10 0
420 I = 100 x 630 63000 I = 420 I = 150

60 3 I

S2FO2R – Search, Strategy, Formula, Operation, Output, Re-check

SECTION C Q13: INDEX NUMBER TIPS Table 3 shows the prices and the price indices for four ingredients, J, K, L and M, used in making particular STEPS: kind of cakes. Diagram 6 is bar chart which represents the relative amount of the ingredients J, K, L and M, 1. To find Index Number, I used in making these cakes. Use the formula: Q I = 1 X 100 or Prices per Prices Index Q0 kg(RM) for the for year Ingredi year 2007 based Base year Specific year ants on year2003 2003 2007 Q0 Q1 J 0.40 0.60 150 100 I K a 0.40 80 L 2.00 b 140 Q0 Q = 1 , therefore M 0.80 1.00 c 100 I Table 3 Q I = 1 X 100 Q0 Where: I = Index Number 140 Q0 & Q1 = Quantity / Price 120 100 80
Amount 40 Used

60 20 0 J K L Ingredients Diagram 6 M

a) Find the values of a, b and c. b) i) Calculate the composite index for the cost of making these cakes in year 2007 based on the year 2003. ii) Hence, calculate the corresponding cost of making these cakes in the year 2003 if the cost in the year 2007 was RM 3125. c) The cost of making these cakes is expected to increase by 40% from the year 2007 to the year 2008. Find the expected composite index for the year 2008 based on the year 2003. SOLUTION:
2 2

2. Composite Index, Base year Q0 100

__

I =

∑I w ∑w
i i

i

or

Specific year Q1
__

I

a) S FO R – Search, Strategy, Formula, Operation, Output, Re-check 3. The value of weightage, wi,, usually 2003 2007 given in types of bar chart, pie chart, a 0.40

Sign up to vote on this title