These notes for CBSE Class 11 Economics, Chapter 8, explain Index Numbers as a statistical tool to measure relative changes in related variables over time. Key features include expression in percentages, acting as special averages, and measuring temporal changes. The chapter details problems in constructing index numbers, such as selecting items, base periods, prices, weights, averages, and formulae. It differentiates between simple and weighted price index numbers, outlining methods like the Simple Aggregate Method and Weighted Average of Price Relative Method. The uses of Consumer Price Index (CPI) for calculating purchasing power and dearness allowance, Wholesale Price Index (WPI) for measuring inflation and wholesale price changes, and Index Number of Industrial Production (IIP) for tracking industrial output are discussed. The notes also define Sensex as a stock market indicator. These notes are designed to aid students in revising the core concepts of index numbers for their exams.
Last optimized 10 Aug 2026
1. Meaning: Index numbers is a statistical tool for measuring relative change in a group of related variables over two or more different times. 2. Features of an Index Number a. They are expressed in percentages. b. They are special types of averages. c. They measure the effect of change over a period of time.
a. Defining the purpose of index numbers b. Selection of items c. Selection of base period d. Selection of prices e. Selection of weights f. Choice of an average g. Choice of the formulae
a. Simple Index Number b. Weighted price Index numbers
There are two methods
a. Simple aggregate Method
b. Weighted Average of Price Relative Method:-
Under this method commodities are assigned weight or the basis of base’s year value (W= P0 Q 0 ) or fixed weights (W) are used.
a. It is used in calculating purchasing power of money b. It is used for grant of Dearness Allowance. c. It is used by government for framing wage policy, price policy etc. d. CPI is used as price deflator of income e. CPI is used as indicator of price movements in retail market.
a. It measures the relative change in the price of commodities traded in wholesale market. b. It indicates the change in the general price level. c. It does not include services
a. Basis of Dearness Allowance b. Indicator of changes in economy c. Measures the rate of inflation
It indicates the changes in level of Industrial production or a percentage change in physical
volume of output of commodities in following industries
a. Mining
b. Quarrying
c. Manufacturing
d. Electricity etc.,
a. Helps us to measure changes in price level b. Help us to know changes in cost of living c. Help government in adjustment of salaries and allowances d. Useful to Business Community e. Information to Politicians f. Information regarding foreign trade
SENSEX is the short form of Stock Exchange Sensitive Index with 1978-79 as base. It is a
useful guide for the investors in the stock market. It deals with 30 stocks represented by 13
sectors of the economy.
Questions:-
1. What is an Index Number?
2. What is a Base Year?
3. What is SENSEX?
4. Mention any three problems in the construction of Index Numbers
5. Calculate weighted average of price relative index from the following data
An Index Number is a statistical tool used to measure the relative change in a group of related variables over two or more different times.
Index numbers are expressed in percentages, are special types of averages, and measure the effect of change over a period of time.
Problems include defining the purpose, selecting items, choosing the base period and prices, assigning weights, and selecting the appropriate average and formula.
CPI is used to calculate the purchasing power of money, grant dearness allowance, and as a price deflator for income.
WPI measures the relative change in the prices of commodities traded in the wholesale market and indicates the change in the general price level.
Sensex is the Stock Exchange Sensitive Index, a guide for stock market investors, representing 30 stocks from 13 economic sectors.
IIP indicates changes in the level of industrial production or the percentage change in the physical volume of output in industries like mining, manufacturing, and electricity.
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