# Class 11 Economics Chapter 14 Index Numbers

Class 11 Economics Chapter 14 Index Numbers, (Assam Higher Secondary Education Council) AHSEC Class 11 Economics Question Answer in English Medium each chapter is provided in the list of AHSEC so that you can easily browse through different chapters and select needs one. Assam Board Chapter 14 Index Numbers Class 13 Correlation Question Answer can be of great value to excel in the examination.

## AHSEC Class 11 Economics Chapter 14 Index Numbers

Class 11 Economics Chapter 14 Index Numbers Notes cover all the exercise questions in SCERT Textbooks. The SCERT Class 11 Economics Chapter 14 Index Numbers Solutions provided here ensure a smooth and easy understanding of all the concepts. Understand the concepts behind every chapter and score well in the board exams.

Index Numbers

Chapter – 14

PART – B

1. An index number which accounts for the relative importance of items is known as

(i) Weighted index

(ii) Simple aggregative index

(iii) Simple average of relatives

Ans: (i)Weighted Index

2. In most of the weighted index numbers, the weight pertains to

(i) Base year

(ii) Current year

(iii) Both base and current year

Ans: (iii) Both base and current year .

3.The impact of change in the price of a commodity with little weight in the index will be .

(i) Small

(ii) Large

(iii) Uncertain

Ans: (i) Small.

4. A consumer price index measure changes in

(i) Retail prices

(ii) Wholesale.prices

(iii) Producers prices

Ans : (i) Retail prices.

5. The item having the highest weight in consumer price index for industrial workers is ―

(i) Food

(ii) Housing

(iii) Clothing

Ans: (i) Food.

6. In general inflation is calculated by using

(i) Wholesale price index

(ii) Consumer price index

(iii) Producers ‘ price index

Ans : (ii) Consumer price index.

SHORT & LONG TYPES ANSWER QUESTIONS :

1. Define index number.

Ans: It is a statistical device which is used to compare a group of related variables in two or more than situations.

2. Mention two important features of index number

Ans: (a) These are specialised averages.

(b) They measure net change in the Variables.

3. What are the three types of index number ?

Ans: The three types of index numbers are:

(a) Price Index.

(b) Quantity Index.

(c) Cost of living Index.

4. Who introduced the concept of index number first and what was the reference ?

Ans: G R. Carli, an Italian, who used it in 1764 to study the effect of the discovery of America upon the price level in Italy on grain, oil and wine.

5. ‘ Index numbers are economic barometer comment on the statement.

Ans: Because we can know the general economic and business activity of the economy by having a look at important indices like prices , output of agriculture , industry etc.

6. Define base year. What are its types ?

Ans: This is a period against which comparisons are made These are of types:

(a) Fixed base

(b) Chain base

7. What is meant by price relative ?

Ans: These are the percentages of current prices with reference to base year prices.

8. What is meant by Pₒ and P₁

Ans: P₀ =base year price .

P₁= current year price .

9. Which method is generally used in the construction of index numbers ?

Ans: Fisher’s ideal index number.

10. What are the uses of consumer price index number ?

(c) Helps in formulation of govt. policies.

(d) Help in market analysis.

11. Write the use of industrial production index.

Ans: (a) Indicators of business conditions.

12. Why do we need an index number ?

Ans: An index number studies changes in prices over a period of time. It helps in studying inflation, Changes in industrial production and changes in cost of living of the community.

13. What does a consumer price index for industrial workers measure ?

Ans: Cost of living as well as rate of inflation. On the basis of this price index workers are allowed dearness allowances.

14. Is the change in any price reflected in a  price index number ?

Ans: No, index number is an average of changes in prices of represen tative commodities .  It does not reflect changes in price obtain individual commodities.

15. Write the steps in construction of price index numbers.

Ans: (a) Purpose of index number must be clearly decided.

(b) Selection of a normal base period.

(c) Selection of items or commodities.

(d) Selection of price quotation from representative places.

(e) Choice of particular average, ie, mean, median, mode or geometric mean should be used.

(f)Selection of weights and selection of methods.

16. What is weighted aggregative index number ?

Ans: In these methods, different weights are assigned to different items Such weights can be in physical or value items.Physical weights are expressed in quantities whereas value weights are the product of price and quantity multiplied together for each item .

17. Define time reversal test and factor reversal test.

Ans: It is a test to ascertain the accuracy and adequacy of the formula.This test was given by Irving Fisher , which claims that , ” for mula for calculating index numbers will only be adequate if it works both ways in time ie , backward and forward . ” symbolically – P01xP10 – 1 .  Again , factor reversal test holds that product of a price index and the quantity index should be equal to the correspondence value index number. It means that the change in price multiplied by change in quantity should be equal to total change in value .  Symbolically―

P₀₁× Q₀₁= Σp₁q₁/ Σp₀q₀

18. Write the steps for construction of consumer price index numbers .

Ans: (a) Determining the section of people under study.

(b) Conducting family budget enquiry.

(c) Classification of consumption pattern.

(d) Price quotations collections

19. What are the difficulties in the construction of index number ber.

Ans: The difficulties in the construction of index number:

(a) Difficulty of choosing appropriate price quotations .

(b) Difficulty of selecting a base year.

(c) Variation in quantity or quality of goods.

(d) Difficulty in choosing an average.

(e) Difficulty of comparisons .

20. Write the limitations of index numbers.

Ans: The limitations of index numbers are :

(a) Limited use

(b) Not true indicator

(c) Non comparable

(d) Possibility of manipulations.

(e) Excessively based on samples

(f) Use of different methods.

21. Why do we need an index number ?

Ans: An index number studies changes in prices over a period of time.It helps in studying inflation, Changes in industrial production and changes in cost of living of the community .

22 . What are desirable properties of the base period ?

Ans : (a) It should be a normal year free from abnormal events like earthquake , drought , war , political upheavals etc.

(b) It should not too far off because distant periods raise uncertainty.

23. Why is it essential to have different CPI for different categories of consumers ?

Ans: Because each group of consumers use a different set of items, their prices are different in different regions.  It is therefore necessary that each set of consumers should have different consumer price index .

24. Is the change in any price reflected in a price index number ?

Ans: No , index number is an average of changes in prices of representative commodities .  It does not reflect changes in price of an individual commodities .

25. What is the difference between a price index and quantity index ?

Ans : Price index shows changes in prices of selected items during a specific period whereas quantitative index shows changes in quantities over a period of item. Price index is related to wholesale price index of consumer price index, whereas quantity index refers to changes in industrial production or agricultural production .

26. Can the CPI for urban non – manual employees represent the changes in the cost of living of the president of India ?

Ans: Yes , it represents the index number of urban areas belonging to non – manual working class , since President of India also belongs to this class , therefore it rightly represents the cost of living index of President of India.

27. What does a consumer price index for industrial workers measure ?

Ans: Cost of living as well as rate of inflation.On the basic of this price index workers are allowed dearness allowances.

28.  Write the formulas of unweighted price index .

Ans: The unweighted price index are – simple aggregative method and average of price relative method.The formulas are ―

(a) Simple Aggregative Method :

(b) Average of Price Method :

29. The monthly per capita expenditure incurred by workers for an industrial centre during 1980 and 2005 on the following items are give below. The weights of these items are 75 , 10 , 5 , 6 living for 2005 with 1980 as the base .  and 4respectively. Prepare a weighted index number for cost of living for 2005 with 1980 as the base.

Ans: For calculation we make the following table―

30. If the salary of a person in the base year is Rs.  4000 per annum and current year salary is Rs. 6000. By how much should his salary rise to maintain the same standard of living if the CPI is 400 ?

Ans:  Current salary should be

31. Write the formula for weighted Price Index ( Average Price Relative Methods ).

Ans: The formulas are―

32. An enquiry into the budget of middle class families in a certain city gave the following information.

What is the cost of living index of 2004 as compared with 1995.

Ans:

33. Write the formulas of weighted Price Index (Simple aggregative Method)

Ans: Weighted Price Index include the formulas of Laspeyer’s Paasche’s Dorbish-Bowley, Fishers and Marshall-Edgeworth’s index number formulas. Thus are―

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