Download - Index Numbers Jasvinder
-
8/3/2019 Index Numbers Jasvinder
1/29
BY: JASVINDER SINGH
MBA -1(C)
MB-134
To: Dr. Sonia
-
8/3/2019 Index Numbers Jasvinder
2/29
Introduction
Definition
Characteristics
Uses
Problems
Classifications
Methods Value index numbers
Chain index numbers
-
8/3/2019 Index Numbers Jasvinder
3/29
An index number measures the relative
change in price, quantity, value,or some
other item of interest from time period to
another.
A simple index number measures the relative
change in one or more than one variable.
-
8/3/2019 Index Numbers Jasvinder
4/29
An index number measures how much a
variable changes over time.
We Calculate the index number by findingthe ratio of the current value to a base
value.
-
8/3/2019 Index Numbers Jasvinder
5/29
Index numbers are quantitative measures of
growth of prices, production, inventory and
other quantities of economic interest.
Ronald
-
8/3/2019 Index Numbers Jasvinder
6/29
Index numbers are specialized averages
.
Index numbers measure the change in the
level.
Index number measure the effect of changes
over a period of time.
-
8/3/2019 Index Numbers Jasvinder
7/29
To framing suitable policies.
They reveal trends and tendencies.
Index numbers are useful in deflating.
-
8/3/2019 Index Numbers Jasvinder
8/29
Choice of the base period.
Choice of an average.
Choice of index.
Selection of Commodities.
Data collection.
-
8/3/2019 Index Numbers Jasvinder
9/29
Price Index.
Quantity Index.
Value Index.
Composite Index.
-
8/3/2019 Index Numbers Jasvinder
10/29
UNWEIGHTED
a) Simple Aggregative.
b) Simple average of price relative
WEIGHTED
a) Weighted aggregated.b) Weighted average of price relative
-
8/3/2019 Index Numbers Jasvinder
11/29
It consists in expressing the aggregate price ofall commodities in the current year as apercentage of the aggregate price in the baseyear.
P=pp100
P=Index number of current year
p=Total of current years price of all the
commodities. p=Total of the base years price of all
commodities
-
8/3/2019 Index Numbers Jasvinder
12/29
COMMODITIES UNITS PRICE(RS)
2007
PRICE(RS)
2008
Sugar Quintal 2200 3200
Milk Quintal 18 20
oil Litre 68 71
Wheat Quintal 900 1000
Clothing Meter 50 60
-
8/3/2019 Index Numbers Jasvinder
13/29
Commoditi
es
Units Price(Rs)
2007
Price(Rs)2
008
Sugar Quintal 2200 3200
Milk Quintal 18 20
oil Litre 68 71
Wheat Quintal 900 1000
Clothing meter 50
p=3236
60
p=4351
Index number for 2008-P=p100= 4351 3236 100 = 134.45
-
8/3/2019 Index Numbers Jasvinder
14/29
The current year price is expressed as a price
relative of the base year price. These price
relative a re then averaged to get the index
no. The average used could be arithmeticmean or even median.
P=(p/p100)N
When geometric mean is used:
log P=log (p/p100)N
-
8/3/2019 Index Numbers Jasvinder
15/29
From the data given below construct the index
number for year 2008 taking 2007as by using
arithmetic mean.
COMMODITIES PRICE
(2007)
PRICE
(2008)
P 6 10
Q 2 2
R 4 6
S 10 12
T 8 12
-
8/3/2019 Index Numbers Jasvinder
16/29
Index number using arthmetic mean-
Commodities Price
(2007)
Price
(2008)
Price
relative
P 6 10 166.7Q 12 2 16.67
R 4 6 150.0
S 10 12 120.0T 8 12 150.0
P=(p100)/ N= 603.37/5=120.63
-
8/3/2019 Index Numbers Jasvinder
17/29
These are those index number in whichrational weights are assigned to variouschains in an explicit fashion.
Weighted aggregative aggregative indexnumbers, these index numbers are thesimple aggregative type with thefundamental difference that weights areassigned to the various items included in theindex.
Dorbish and Bowleys method.
Fishers method.Marshall-Edgeworth method. Laspeyres method. Paasche method. Kellys method.
-
8/3/2019 Index Numbers Jasvinder
18/29
This method was devised by Laspeyres in1871.in this method the weights aredetermined by quantities in the base.
p= pq pq 100
PAASCHES METHOD. This method was devised by a German
sttistician Paasche in 1874.The weights ofcurrent year are used as base year inconstructing the Paasches index number.
p=pq pq 100
-
8/3/2019 Index Numbers Jasvinder
19/29
This method is a combination of laspeyres andPaasches methods.If we find out the arithmetic averageof Laspeyres and paasches index we get the indexsuggested by Dorbish &Bowley.
p=(pq pq) + (pq pq) /2100
FISHERS IDEAL INDEX .
It is the geometric mean of the Laspeyres andPaasches index numbers.
p=(pq pq) (pq pq) 100
-
8/3/2019 Index Numbers Jasvinder
20/29
In this index number the numerator consist of anaverage of the current years price multiplied bythe weights of both the base year as well as thecurrent year.
p=(pq + pq) (pq + pq) 100
KELLYS METHOD.Kelly thinks that a ratio of aggregates with
selected weights (not necessarily of base or
current year) gives base index number.p = pq pq 100
q refers to quantites of the year which isselected as the base.i may be any year, eitherbase or current year.
-
8/3/2019 Index Numbers Jasvinder
21/29
Given below are the price quantity data,with
price quoted in Rs. And production in qtls.Find -
Laspeyers Index, Paasches Index, Fisher Ideal
Index.Items Price
(2002)
Production
(2002)
Price
(2007)
Production
(2007)
Beef 15 500 20 600
Mutton 18 590 23 640
Chicken 22 450 24 500
-
8/3/2019 Index Numbers Jasvinder
22/29
ITEM PRICE
(p)
PROD
UCTION(q)
PRICE
(p)
PROD
UCTION(q)
(pq) (pq) (pq) (pq)
Beef
15 500 20 600 10000 7500 12000 9000
Mutton
18 590 23 640 13570 10620 14720 11520
Chicke
n 22 450 24 500 10800 9900 12000 11000
TOTAL
34370 28020 38720 31520
-
8/3/2019 Index Numbers Jasvinder
23/29
1.Laspeyres index;p=pq pq 100
=34370/28020 100 = 122.66
2.Paasches index;
p=pq pq 100= 38720/31520 100 = 122.84
3.Fisher Ideal indexp= (pq pq) (pq pq) 100
= 34370/ 28020 38720/ 31520 100 = 122.69
-
8/3/2019 Index Numbers Jasvinder
24/29
In weighted Average of relative, the price
relative for the current year are calculated
on the basis of the base year price. These
price relative are multiplied by therespective weight of items. These products
are added up and divided by sum of weights.
Weighted arithmetic mean of price
relative-P=PV/ V, Where P= p100
P=Price relative and V= Value weights= pq
-
8/3/2019 Index Numbers Jasvinder
25/29
Value is the product of price and quantity. A
simple ratio is equal to the value of the
current year divided by the value of the base
year. If the ratio is multiplied by 100 we getthe value index number.
V=pq pq 100
-
8/3/2019 Index Numbers Jasvinder
26/29
When this method is used the comparisons
are not made with a fixed base, rather the
base changes from year to year. For example,
for 2007,2006 will be the same and so on.
Chain Index for current year
Average link relative of current year Chain
index of previous year /100
-
8/3/2019 Index Numbers Jasvinder
27/29
From the data given below construct an
index number by chain base method.
Price of commodity from 2006 to 2008
YEAR PRICE
2006 50
2007 602008 65
-
8/3/2019 Index Numbers Jasvinder
28/29
YEAR PRICE LINKRELATIVE CHAIN INDEX(BASE 2006)
2006 50 100 100
2007 60 6050100=120 1201001OO=12
0
2008 65 6560100=108 108120100=
129.60
SOLUTION
-
8/3/2019 Index Numbers Jasvinder
29/29
THANK YOU