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SSC Online Preparation: Index Number
The index number is a technique in statistics to measure changes in the economic variable or variables concerning time. It is used in economics to measure trends in areas like the stock market, money market, export, import, etc.
Characteristics of Index Number:
Types of Index Number:
1. Wholesale Price Index Numbers: These are measured based on wholesale prices of certain critical raw materials and semi-finished goods. The sample basket includes important commodities, as well as price sensitive.
2. Retail or Consumer Price Index Number: This is measured based on retail prices of final consumer goods. Here fluctuations are very high.
3. Quantity Index Number: This is measured in terms of changes in the number of products produced or consumed physically.
4. Industrial Index Number: These are constructed to measure the change in industrial production over time.
5. Wage Index Number: It is estimated to find the differences in the wages of workers over some time.
6. Cost of Living Index Number: These are measured based on the essential goods and services consumed by ordinary people.
Methods of constructing Index Number:
There are two methods of building the index number. These are as follows:
1. Aggregation Method:
2. Relative Method
There are two commodities, A and B.
Price of Commodity A in base year=20
Price of commodity B in support year=15
Amount of commodity C in bottom year=10
Price of commodity A in current year= 25
Price of commodity B in current year= 15
Price of commodity C in current year=10
Price Index= *100