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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
            1) We calculate link relative
                     Link relative=                             *100
                 2) We take just reverse the step I to get chain indices we
              multiply the current period to link relative by answer of
              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
                         b. Meadian
                         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
                         b. Meadian
                         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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