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Index Numbers

Theory and Formula



Question

Q1. Consumer price index is commonly known as
(a) Value index number   (
b) Ideal Index number   
(c) Cost of living index number   
(d) Whole sale price index number

Solution.
(c) Cost of living index number   
Solution

Q2. Fisher's ideal index number does not satisfy
(a) Factor reversal test
(b) Time reversal test
(c) Circular test
(d) Unit test

(c) Circular test
Solution

Q3. Net monthly salary of an employee was Rs.6000.The consumer price index number in 2000 is 250 with 1994 as base year . If employee has to be rightly compensated then the additional dearness allowance to be paid is ________ ,

Solution.
S0/I0
=
S1/I1


where S0 = salary of base year , I0 = Index of base year , S1 = salary of current year, I1 = Index of current year

6000/100
=
x/250
,

x = 15,000

In current year , employee require Rs 15,000 to maintain same living standard as in base year. So he require additional allowance Rs.9000.
Solution

Q4. If the price of a commodity in a place have decreased by 22% over the base period prices, then the index number of that place is .
(a) 78%   (b) 48%   (c) 122%   (d) 22%

Solution.
(a) 78%   

= (100 - 22)% = 78%
Solution

Q5. _______________ Index Number is Geometric Mean of Lespeyer's and Paasche's Index Number .
(a) Fisher's (b) Dorbish Bowley (c) Marshall Edgeworth (d) None of these

Solution.
(a) Fisher's
Solution

Q6. Write the formula of Aggregate expenditure formula to find cost of living index .

Solution.
∑p1q0/ ∑p0q0
x 100

Note : This is similar to Laspeyer's price index number .
Solution

Q7. In time reversal test P01 x P10 = ____________ .
(a) 1 (b) 2 (c) 3 (d) None of these

Solution.
(a) 1
Solution

Q4. The A.M. of Lespeyer's and Paasche's Index Number = ________________.
(a)Dorbish Bowley (b) Marshall Edgeworth (c) Fisher's (d) Kelly's

Solution.
(a)Dorbish Bowley
Solution

Q9. Price of a commodity at a place has decreased by 25% over the base period prices , then the index number of that place is :

Solution.
75
Solution

Q10. The index number of base year is
(a) 100 (b) 120 (c) 50 (d) None of these

Solution.
(a) 100
Solution