Index Number
An index number is a statistical device for measuring changes in the magnitude of a group of related variables. Index numbers measure the changes with respect to time geographical location or some other characteristics.
It also measures the changes volume of production in different sectors of an industry, production of agricultural crops, cost of living, etc
Unweighted index numbers
Weighted index numbers
Weights are assigned to all items or commodities in an explicit manner. Such weights indicate the relative importance of items or commodities included in the calculation of an index.
Weighted index numbers can be constructed by two methods:
- Weighted aggregative method
- Weighted average of price relatives method
Weighted Aggregative method
Some of the important methods of constructing weighted aggregative indices are:
Laspeyre’s method
In this method weights are represented by the quantities of the commodities in the base year.
