Taking of I year as base, construct the index numbers for II and III years from the following data. Use the simple average of relatives method.

Question: Taking of I year as base, construct the index numbers for II and III years from the following data. Use the simple average of relatives method.

YearABC
I4 kg2 kg1 kg
II2.5 kg1.6 kg1 kg
III2.0 kg1.25 kg0.8 kg
Year Articles (Rate per Ruppes)

Solution:

In this example, prices are given in quantity per rupee’. Thus, before computing price relatives, these are to be converted into ’rupees per unit of quantity’. Considering the unit of the quantity as ’quintal’ the prices in ’rupees per quintal’ are given below – Year Price (in Rupees per quintal)

homework

Now, the price index numbers for II and III years (I years as base) can be constructed as usual. The procddure is clarified in the following table- Construction of price Relatives