# Index Number

Index number is method to find out the average changes in related variables. It is a statistical device (measure). Mostly price index numbers are used in practical statistics.

• It’s purpose of showing average changes in one or more related variable (like price or quantity) between 2 period of time (between 1991 and 1996) or two places (like Delhi and Mumbai) or countries (like India and Japan).

• Consumer price index number or cost of living index number helps in taking such decisions.

• Different commodities are measured in different units.

For example:

• Wheat and rice are measured in Kilograms,

• Cloth in meters,

• Milk in liters etc.

• Index numbers are indicators of the various trends in an economy.

• It may be simple or weighted.

• Price index numbers indicate the position of prices, whether they are rising or falling at which rate.

## Features of an Index Number:

### Specialized type of averages:

• Central tendency measure used to compare two or more series.

• Face a problem of difference in units of measurement.

For example: Average height of students of a class is 100 cms, their average weight is 50 kgs.

• Method of Index number helps to overcome this difficulty. That’s why it’s called specialized types of averages.

### Measure the net change in a group of related variables:

• Describe the change in a group of related variables in terms of a single figure.

• Within the group some goods might have become cheaper or costlier in comparison to others.

### Measure the effect of change over a period of time or places:

• Mostly used for measuring changes over a period of time.

• Compare the agricultural production, industrial production, imports, exports, wages etc at two different times.

• Used to compare economic conditions of different areas or different industries.

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