FORMULA FOR ALL METHODS OF CONDTRUCTION OF INDEX NUMBER :

I.UNWEIGHTED OR SIMPLE INDEX NUMBER.

1.SIMPLE AGGREGATE METHOD:

P01= ΣP1/ ΣP0*100

WHERE ΣP1= Total of current year prices

ΣP0=Total of base year prices

2.SIMPLE AVERAGE OF PRICE RELATIVES METHOD:

i. USING ARITHMETIC MEAN:

P01= ΣP/N

Where P = P1/P0 *100

ii. USING GEOMETRIC MEAN:

P01 = antilog{ ΣlogP/N}

Where P = P1/P0 *100

II. WEIGHTED INDEX NUMBER:

1.WEIGHTED AVERAGE OF PRICE RELATIVES METHOD:

i. USING ARITHMETIC MEAN:

P01 = ΣPW/ ΣW

If quantity is given, then W can be computed as W=P0 Q0

ii. USING GEOMETRIC MEAN:

P01 = Antilog{ ΣWlogP/ ΣW}

Note: Index number are not only meant for prices.

It is also for quantity. So in case of quantity index, in the above formulae,

P can be replaced to Q.

2.WEIGHTED AGGREGATE METHOD:

Price Index Number

i.Laspeyre’s method:

P01 = Σp1q0/ Σp0q0 *100 Q01 = Σp0q1/ Σp0q0 * 100

ii. paasche’s method:

P01 = Σp1q1/ Σp0q1 *100 Q01 = Σp1q1/ Σp1q0 * 100