Index no. and its Calculation

Index number is a statistical measure that expresses the change in a variable over a period. Index number is used to track changes in the price level of goods and services over time. Some common examples of index numbers are the consumer price index (CPI), wholesale price index (WPI), and stock market indices. The formula for calculating index number varies depending on the type of index.

Calculation of Index no.

The formula for calculating the index number is given as:

Index number = (Sum of price relatives / Number of price relatives) x 100

Where,

Price relatives are the ratio of the price of an item in a given period to its price in a base period.

Sum of price relatives is the sum of all the price relatives.

Number of price relatives is the total number of price relatives used to calculate the index.

Explanation of options

Option A: Sum of price relatives

The sum of price relatives is used in the formula to calculate the index number. However, it is not equal to the index number.

Option B: Average of the price relatives

The correct formula for calculating the index number is the average of the price relatives. The average of the price relatives is the sum of all the price relatives divided by the total number of price relatives.

Option C: Product of price relative

The product of price relatives is not used to calculate the index number. The sum of price relatives is used instead.

Option D: None

The correct formula for calculating the index number is the average of the price relatives. Therefore, the correct answer is option B.

Conclusion

Index number is used to track changes in the price level of goods and services over time. The formula for calculating the index number varies depending on the type of index. The correct formula for calculating the index number is the average of the price relatives.