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Index numbers are widely used in economics for various data such as GDP, house prices, productivity, exchange rates, and inflation. These numbers are preferred because they simplify complex and long figures into more manageable and easier-to-understand representations. By using index numbers, economists avoid dealing with long and complicated figures, making it easier to interpret and analyze economic data, which ultimately facilitates decision-making processes.

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What is the main purpose of index number?

The primary purposes of an index number are to provide a value useful for comparing magnitudes of aggregates of related variables to each other, and to measure the changes in these magnitudes over time. Consequently, many different index numbers have been developed for special use.

What is meaning of price index numbers?

price index, measure of relative price changes, consisting of a series of numbers arranged so that a comparison between the values for any two periods or places will show the average change in prices between periods or the average difference in prices between places.

What do you mean by an index number explain its uses and limitations?

An index number is a device for measuring changes in a variable ora group of related variables. The index number of industrial activity enables us to study the progress of industrialization in the country. These cost of living index numbers show changes in the prices of goods generally consumed by people.

What is the cost-of-living index number is known?

Consumer price index Consumer price index (CPI), also known as the cost of living index, measures the average change in retail prices. Consider the statement that the CPI for industrial workers (2001=100) is 277 in December 2014.

What is the main use of index number?

Index number helps the Government to formulate its price policies. They are also used to evaluate the purchasing power of money. Index numbers are also being used for forecasting business and economic activities, business cycles etc.

What do index numbers tell you?

Economists are interested in how changes in the monetary value of economic transactions can be attributed to changes in price (to measure inflation) and changes in quantity (to measure sales volume or economic output). Index numbers typically measure these changes over time.

What are the limitations of using index number?

Index Numbers: meaning and characteristics Q.4 What are the major limitations of index numbers?Answer:(4) Limited use● There is no master index number or all in one index number. ● Use of each index number is restricted to its specific object.5 more rows Feb 18, 2020

What are the problems of index numbers?

Difficulties faced in the Construction of Index Numbers Difficulties in Choosing a Base Period: Problem in Commodity Selection: Problems in Price Compendium: Difficulty in Choosing a Statistical Approach: Difficulties Resulting from Changes Over Time: It is not possible to make a comparison:

What is the purpose of an index number in marketing?

In statistics and marketing research, an index number most commonly represents an indicator of average percentage change in a series of figures where one figure, called the base, is assigned an arbitrary value of 100 and the other figures are adjusted in proportion to the base.

How do index numbers work?

An index starts in a given year, the base year, at an index number of 100. In subsequent years, percentage increases push the index number above 100, and percentage decreases push the figure below 100. An index number of 102 means a 2% rise from the base year, and an index number of 98 means a 2% fall.

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