The

**number**of**wholesale**prices is**calculated**on the basis of the wholesale prices for**certain**key raw**materials**.These raw

**materials**in the index are**raw materials**and semi-finished products. The most**important**and price-**sensitive**.**semi**-finished products

**bought**and sold on the

**wholesale**market are

**selected**and weighted

**according**to their relative

**importance**.

Due to the

**dynamics**of global consumption patterns, the individual number and variety of goods are subject to constant**change**.A normal period means that it is free of all sorts of

**anomalies**and accidental causes such as**financial**crises, floods,**famines**, earthquakes, strikes**against**workers, wars, etc.

**Steps In Construction Of Consumer Price Index Number**

**Steps In Construction Of Index Number**

**Base Period For An Index Number Should Be**

**Steps Involved In Construction Of Index Number In Statistics**

**Value Index Number Formula**

**Problems In Construction Of Index Number**

**Construction Of Index Number PDF**

**Solved Questions On Index Numbers**For each period, a fixed base

**average**is chosen, as it is**difficult**to choose a single period as "**normal**," and a better choice is to take an average of several**periods**as a base.The construction index number aims to define which

**items**are directly related to the**respective**purpose and are**included**.**Consumer**behavior may change,

**rendering**the index figure

**useless**. The system requires a chain-based

**comparison**from year to year, and this is used.

The

**second**problem with the number of the**construction**index is the choice of raw**materials**.**Commodities**are not as representative as they were**selected**to keep track of the**purpose**and nature of the index number.The

**base**year is selected in two ways: a fixed base**method**, in which the base year**remains**fixed in the chain, or a base**method**,in

**which**the base years go up and**down**and change from**1980**(the base year**1979**) to**1979**to**1979**and then back to the base**year 1978**.For

**demonstration**purposes, let us create an index number to evaluate the**fluctuations**in tuition fees for the**2020**-**2021**school year**compared**to the base period 2006-**2007**.**Tuition**fees are $

**4,400**for

**2006-07**and $6

**,610**for 2020-21

**(Duffin 2020)**. A

**practical**difficulty in

**creating**an index number is the

**selection**of the base period.

**Determining**the weights of raw materials

**according**to their relative importance is a practical difficulty in

**constructing**the index number.

In practice, when determining the significance of a commodity price for the overall price level (i.e. its price as quantity produced, consumed, or bought), we can use quantity weights to construct the weight of the aggregate price

**index**.If the

**quantity**in the base period**deviates**from the**quantity**for a**certain**period, as shown in**Table**4, we have several options for**selecting**the**quantity**weight. First, we can**determine**whether**commodity**weights**distort**the index numbers.The simplest way to

**calculate**the total price index is to calculate an**unweighted**total index. The index is calculated by adding.the unit prices in the

**interest**period and dividing the resulting amount by the sum of the**price**units in the base period. The ratio of the two sums is**multiplied**by**100,**as is usual in index number**construction**.An index figure is also

**known**as an economic barometer. The**advantages**of using index numbers are as**follows**:**Helps**formulate strategies Most economic and corporate

**decisions**and strategies are

**guided**by index numbers. The answer to the following problems when

**constructing**index numbers is

**Purpose**of index numbers There are many

**different**types of index numbers that can be

**constructed**for different

**purposes**. The correct and reliable source must be

**selected**.

**Weighted**total quantity indices attempt to measure quantity

**changes**, but they do not use

**quantity**when using weights.

**Similar**to weighted total price

**indices**, they use

**fixed**-price

**weights**for the quantity

**weighted**by the

**associated**price.

The weights used in the

**construction**price and**volume**indices use the same index number**method**.In this example, the

**expenditure**in 1996**compared**to 1982 on the basis of the**unweighted**1990 price index is**$249, 123, 220, 14,500, 70,000,****130, 150, 8,000**and**30,000 (100% and 22.2%)**.Based on the

**calculated**figure of the**Unweighted**Price Index for 1996, the prices of normal**motor vehicle**operating costs increased by 12.2 percent**between**1982 and 1996.The Wholesale Price Index (WPI) is the price of a

**representative**shopping basket. The**United States**notifies the**producer**price index.Some

**countries**, such as the**Philippines**, use the**WPI**to**change**the key measure of inflation. India recently**introduced**the new CPI to**measure**inflation.**We**will calculate the basket

**values**for

**2006**and

**2007.**The

**price**index is the ratio of the

**expenditure**on a basket of goods.

At the

**current**price to the**expenditure**on the basis of the price year. The**figures**refer to the year**2006**and the prices for 2007 are exp.PI0 is

**the**price of a single item in the basic**period**and pit is the price of**individual**items in the**observation**period.

*Read More:*The index is used as the

**base**year number and**100%**of the period with a high**price**level is**represented**as an index**greater**than 100% and**period**with a low**price**level as an index lower than**100%.****Rising**prices

**mean**that the currency of a given

**economy**loses

**purchasing**power and can be

**bought**less with the same amount of

**money**.

Qi0 is the

**number**of**individual**items for the**period**in**which**the index is**based**.
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