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```									I.Com (II)                                      By:- Sir Faisal Murtaza (ACCA) Cell:03064482332

Chapter#4

Definition:
By wheldon:-
“An index is a device which shows by its variation the
changes in a magnitude which is not capable of
accurate measurement in itself or of direct evaluation in
practice”
Index No

Simple Index
Number
Composite
Index
Fixed Base
Chain Base
Weighted

Unweighted
weighted I.N
Marshall
Simple
Aggregative                                         Simple                           Laspeyer's
Average
Paasche's
Fixed Base                                                                                           Fisher's
Chain Base              Fix Base                       Chain Base

SIMPLE INDEX NUMBER
 Fixed Base Method:
“Simple Index number or simple relative is obtained by
dividing the current year price/quantity by base year
and the result in%”

Price relative                                *100 =             P1
100
P0
In Quantity relative we use ‘Q’

Quantity relative=

 Chain Base Method:
We can computed chain base method in two steps
2) We take just reverse the step I to get chain indices we
previous chain indices and divided by 100.

COMPOSITE INDEX NUMBERS

 Un-weighted Index Numbers
An Index number that measures the change in price of group of
commodities when the relative importance of commodities is not
taken into account.

 Simple aggregative method
In simple aggregative method we take year wise total of involved
commodities and the adopt fixed base method.
Fixed Base method:
To calculate this method total index of current year is divided by
total base year index.

 Simple Average of relative:

Fixed Base method:

In fixed base method first of all we find price relative for
each commodity and then average these relatives by using

a. Arithmetic mean
c. Geomertic mean

Chain Base Method

In chain base method first of all we find link relatives
for each commodity and then in 2nd step, we take

a. Arithmetic mean
c. Geomertic mean

And 3rdly find chain indices of each commodity.

 Weighted Index Numbers:
 Weighted aggregative indices:-

Laspeyre’s Method

Paasche’s Method
Fisher’s Method

Marshall-Edgworth’s Method

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