Base Shifting, Splicing and Deflating - Index Numbers, Business Mathematics and Statistics - Business Mathematics and Statistics - B Com

Base shifting

Shifting of base period or reference period of the index is known as base shifting. This can be done using the following relation as,

Example The following are the index numbers of a commodity taking 1991 as the base.

Find the index numbers by changing the base to 1994.

Solution

Splicing The process of combining two or more index numbers covering different bases into a single series is called splicing.
Suppose we have two series A and B, and if series A is spliced with B, then

If series B is spliced with A, then

Example The following are two series A and B of the index numbers of a commodity taking 1991 and 1994 as the base years.

a. Splice the index series of A to B
b. Splice the index series of B to A

Solution
a. Index series A spliced with index series B

b. Index series B spliced with index series A

Deflating
It is a technique used to make allowances for the effect of changing price values. It is used to measure the purchasing power of money.

It can also be found using the relation

Example The table below shows the income of a company and its price index taking the year 1991 as the base.

Calculate the deflated value for every year taking 1991 as the base.

Solution