What is an Index Number? Explain the difficulties or problems inv… - Vidyadip

Question

What is an Index Number? Explain the difficulties or problems involved while constructing an Index Number.

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Answer

An index number is a statistical device used for measuring changes in the magnitude of a group of related variables. Some of the difficulties or problems involved in the construction of index numbers are:

Purpose of the index number is to be absolutely clear, in order to avoid confusion.
Selection of the items to be included is to be done very carefully and suitably, in order to get a meaningful picture of the change involved.
Selection of the source of data is also important. In case of primary data, not being used, the secondary data from the most reliable source should be chosen.

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