Question
Give difference between fixed base and chain base methods.
| Fixed base method | Chain base method |
| $1.$ The year with normal events is taken as the base year. | $1.$ The year preceding the current year for which the index is to be obtained, is taken as the base year. |
| $2.$ The base year remains constant for computing index number for the given time period. | $2.$ The base year keeps on changing for the given time period. |
| $3.$ Since the base year is fixed, uniformity is maintained in comparing changes in the values of a variable quantity. | $3.$ Since the base year is changing, uniformity is not maintained in comparing changes in the values of variable quantity. |
| $4.$ In this method, new items in demand cannot be included and old items out of use or having no preferences cannot be removed. | $4.$ This method permits inclusion of items in demand and exclusion of items out of use or having no preferences. |
| $5.$ The work of selection of a base year is difficult. | $5.$ The question of selecting a base year does not arise as it is automatically selected. |
| $6.$ The base year is to be changed with lapse of time. | $6.$ No such problem arises in this method. |
| $7.$ This method is quite useful for comparing long-term changes in the value of a variable quantity. | $7.$ This method is useful only for comparing short-term changes in the value of a variable quantity. |
| $8.$ It is easy to understand and easy in computation. | $8.$ In this method if there is any mistake in the calculations of Index number of one year then that mistake is carried on in all the subsequent years. |
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| Year | $2010-11$ | $2011-12$ | $2012-13$ | $2013-14$ | $2014-15$ | $2015-16$ |
| Index number of food items | $134.8$ | $115.28$ | $115.57$ | $107.29$ | $109.91$ | $112.80$ |