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Can You Explain The Importance And Advantages Of Index Number?

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Haider Imtiaz Profile
Haider Imtiaz answered
1. Measuring changes in prices: The method of index number is used for measuring changes in price level. The prices of base years are compared to the prices of the current year. To note the increase in prices. The consumers want to know the rate of inflation.
2. Adjusting wages and prices: An index number of cost of living can guide us in the adjustment of wages to the changing prices. The labourers can demand more wages on the basis of changes in price. The government. can revise the pay after regular periods.

3. Industrial production and business activity: Index numbers may be helpful in judging the effect of certain policy adopted by the government. To a businessman, they are helpful in comparing production in his own business with that of industry.

4. Student: Index numbers are helpful to measure the intelligence of the students. The teachers can check their efficiency through such index. The Government. can want to the students and take remedial measures for the improvement of students and teachers.
5. Trade: the volume of trade in one year. Increase and decrease in trade indicate the good or bad trade.

6. Investment index number: Index numbers are helpful in judging the changes in investment. The stock exchange prepares index numbers to show investment made by the people from time to time. The investor can buy and sell shares in order to earn more profit.
7. Employment: It is useful to note the changes in employment level. The Government. can increase the employment level by new jobs. The increase in employment means the economy is developing. Decrease in employment is alarming of the Government. to take remedial measure.
Lily James Profile
Lily James answered

Index numbers are basically economic data figures that reflect the price or quantity compared with standard or base value. It is normally expressed as 100 times the ratio of the base value that equals 100.

Index numbers are very important for economic analysis. They summarize movements in a group of related variables. The consumer Price index is one of the most commonly used form of index number. It measures the changes in the retail prices.

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