Types of Index Numbers 🗂️
Index numbers can be classified based on what they measure. The three main types are:
Quick Overview ⚡
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1. Price Index Numbers (P01) 🏷️
These measure the changes in the price level of a commodity or a group of commodities between two time periods.
- Most Common: This is what we usually mean when we say "Index Number".
- Examples:
- Wholesale Price Index (WPI): Changes in wholesale prices.
- Consumer Price Index (CPI): Changes in retail prices paid by consumers.
P01 = Price Index for current year (1) with respect to base year (0)
2. Quantity Index Numbers (Q01) 📦
These measure changes in the physical volume of goods produced, consumed, or sold. It ignores prices.
- Focus: Production or Consumption levels.
- Example: Index of Industrial Production (IIP) shows if factory output increased or decreased.
3. Value Index Numbers (V01) 💰
These measure changes in the total value of a variable. Value is the product of Price and Quantity (V = P * Q).
- Focus: Total expenditure or total sales.
- Formula: It compares Total Value of Current Year vs Total Value of Base Year.
Comparison Table 📊
| Type | Symbol | Measures Change in... | Formula (Basic) |
|---|---|---|---|
| Price Index | P_01 | Prices | (∑ p1 / ∑ p0) * 100 |
| Quantity Index | Q_01 | Quantity / Volume | (∑ q1 / ∑ q0) * 100 |
| Value Index | V_01 | Total Value (p*q) | (∑ V1 / ∑ V0) * 100 |
Summary
- Price Index is for Inflation/Cost.
- Quantity Index is for Output/Growth.
- Value Index matches total turnover/expense.
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