In this article, we will discover the meaning and types of index numbers. An index number is a tool to measure changes in an economic variable over a period of time. Index numbers were initially created to calculate changes in the price level.
According to spiegel “an index number is a statistical measure designed to show changes in variable or group of related variables with reference to time, geographical location and other characteristics such as income, profession, etc.”
Types of Index number
Following are the types of index number
Price Index Number:
It measures the general changes in the price of goods. The price index number compares the level of prices between two different time periods.
Quantity Index Number:
The second type of index number is the Quality index number it is also named as a volume index number. It calculates differences in the level of output or physical volume of production in the economy.
Value of Index Number:
The value of the commodity is the product of its price and volume i.e quantity ( p× q ) This type of index number measures the changes in the value of a variable in terms of the rupee. The value index number is a more informative index number as it integrates both, changes in the price as well as quantity.
Special Purpose index number:
They are created with some specific purpose. For example, import-export index numbers, labor productivity index numbers, share price index numbers, etc.
So, friends, these were the Meaning and Types of Index Numbers and I hope you have understood them clearly. But still, if you see any need in this post, then please give your view in the comment box and help us to improve that deficiency, thanks.