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

Business Mathematics and Statistics

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The document Base Shifting, Splicing and Deflating - Index Numbers, Business Mathematics and Statistics B Com Notes | EduRev is a part of the B Com Course Business Mathematics and Statistics.
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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,

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

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

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

Find the index numbers by changing the base to 1994.

Solution

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


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

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

If series B is spliced with A, then

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

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

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

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

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

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

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

b. Index series B spliced with index series A

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

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


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.

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

It can also be found using the relation

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

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

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

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

Solution

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

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

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