Base Shifting 🔄
Base Shifting means changing the reference base year of an index number series from an old year to a more recent year.
Why Shift the Base? ❓
- Old Base is Obsolete: Comparing 2024 prices with 1960 is meaningless as habits have changed.
- Comparison: To compare two series that have different base years, we need to bring them to a common base.
The Formula ⚗️
New Index = (Old Index of Current Year / Old Index of New Base Year) * 100
Example 📝
Given: Index numbers with Base 2010.
| Year | 2010 | 2011 | 2012 | 2013 | 2014 |
|---|---|---|---|---|---|
| Old Index | 100 | 120 | 150 | 180 | 200 |
Task: Shift Base to 2012. (i.e., Make 2012 index = 100).
Solution: Divide every old index by the index of 2012 (which is 150) and multiply by 100.
| Year | Calculation | New Index (Base 2012=100) |
|---|---|---|
| 2010 | (100/150) * 100 | 66.67 |
| 2011 | (120/150) * 100 | 80.00 |
| 2012 | (150/150) * 100 | 100.00 |
| 2013 | (180/150) * 100 | 120.00 |
| 2014 | (200/150) * 100 | 133.33 |
Summary
- Base shifting simply rescales the series.
- The trend (up or down) remains exactly the same; only the numbers change.
- The new base year will always have the value 100.
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