1. What Is Index Number Formula?

The Index Number Formula is a statistical measure used to show changes in a variable relative to its value during a base period. It constructs index numbers for prices or quantities, providing a standardized way to track changes over time.

2. How Does The Calculator Work?

The calculator uses the Index Number formula:

Where:

• \( \text{Current Period Value} \) — The value in the current time period
• \( \text{Base Period Value} \) — The reference value from the base period
• \( 100 \) — Scaling factor to express result as percentage

Explanation: The formula compares current values to a base period, with 100 representing no change. Values above 100 indicate increase, below 100 indicate decrease.

3. Importance Of Index Number Calculation

Details: Index numbers are crucial for tracking inflation (CPI), economic performance, stock market trends, and comparing changes in prices, quantities, or values over time across different sectors.

4. Using The Calculator

Tips: Enter both current period value and base period value in the same units. Values must be positive numbers. The result shows the index number as a percentage relative to the base period.

5. Frequently Asked Questions (FAQ)

Q1: What does an index number of 125 mean?
A: An index number of 125 means the current value is 25% higher than the base period value (125 - 100 = 25% increase).

Q2: What is the base period in index numbers?
A: The base period is the reference point (usually set to 100) against which all other periods are compared. It's typically a normal or average period.

Q3: Can index numbers be used for quantity comparisons?
A: Yes, index numbers can track changes in quantities (quantity index), prices (price index), or values (value index) over time.

Q4: What are common types of index numbers?
A: Common types include Consumer Price Index (CPI), Producer Price Index (PPI), Stock Market Indices, and Quantity Indices for production or sales.

Q5: How often should base periods be updated?
A: Base periods are typically updated every 5-10 years to maintain relevance, but this depends on the specific application and rate of change in the measured variable.