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Chapter Analysis
Intermediate13 pages • EnglishQuick Summary
The chapter 'Index Numbers' in Class 11 Economics explores various concepts and methodologies related to index numbers. It introduces index numbers as statistical devices used to measure changes in a group of related variables, such as prices and quantities. The chapter explains the calculation methods, including the aggregative method and the method of averaging relatives, and discusses important indices like Consumer Price Index and Wholesale Price Index. The significance of these indices in economic policy making is also highlighted.
Key Topics
- •Introduction to index numbers
- •Methods of constructing index numbers
- •Simple aggregative price index
- •Weighted indices
- •Consumer Price Index (CPI)
- •Wholesale Price Index (WPI)
- •Importance in economic policymaking
Learning Objectives
- ✓Understand the concept and usefulness of index numbers.
- ✓Learn the methods of calculating index numbers.
- ✓Differentiate between various types of indices like CPI and WPI.
- ✓Recognize the role of index numbers in inflation measurement.
- ✓Apply index numbers in real-world economic analysis.
Questions in Chapter
An index number which accounts for the relative importance of the items is known as (i) weighted index (ii) simple aggregative index (iii) simple average of relatives
Answer: weighted index
Page 102
Why do we need an index number?
Page 102
What are the desirable properties of the base period?
Page 102
Why is it essential to have different CPI for different categories of consumers?
Page 102
Additional Practice Questions
Explain the concept of a base year in index number calculation and its significance.
easyAnswer: A base year in index number calculation is the reference period against which current measurements are compared. It is essential to choose a base year that is stable and representative. This significance lies in its role as a benchmark for understanding changes over time, such as inflation or economic growth.
Differentiate between Laspeyre’s index and Paasche’s index.
mediumAnswer: Laspeyre’s index uses base period quantities as weights, making it useful for comparing cost changes over time without adjusting for quantity changes in the market. Paasche’s index, on the other hand, uses current period quantities, reflecting more accurately the changes in prices considering the current consumption pattern.
How can index numbers be used in economic policymaking?
hardAnswer: Index numbers are crucial in economic policymaking as they quantify changes in economic variables, allowing policymakers to make informed decisions regarding inflation control, wage negotiations, and resource allocation. They also help in assessing economic performance and planning future policies.