Why convert data to indexes?

Submitted by:
Syed Abul Maab Ahmad
Roll No.- 1
 What is an index number?
“It is a numerical value characterising the
change in complex economic phenomenon over
a period of time.”
-Maslow
“Index number is a measure over time designed
to show average change in the price, quantity or
value of a group of items.”
-Gregory and Ward
 Features of index numbers
• Index numbers are specialised averages which
are capable of being expressed in percentage.
• Index numbers measure the changes in the
level of a given phenomenon.
• Index numbers measure the effect of changes
over a period of time.
 Significance of index numbers
• Index number helps in measuring relative
changes in a set of items.
• Index numbers provide a good basis of
comparison because they are expressed in
abstract unit distinct from the unit of element.
• Index numbers help in framing suitable
policies for business and economic activities.
• Index numbers help in measuring the general
trend of the phenomenon.
• Index numbers are used in deflating. They are
used to adjust the original data for price
changes or to adjust wages for cost of living
changes.
• It is helpful in a study of comparative
purchasing power of money in different
countries of the world.
• Index numbers of business activities throw
light on the economic progress made by
various countries.
 Problems in construction of index
numbers
• The purpose of Index.
• Selection of the items.
• Selection of the Base period.
• The choice of an average.
THANK YOU