USES OF INDEX
NUMBERS IN
ECONOMIC DATA
What are INDEX
NUMBERS?
INDEX NUMBERS are used to measure the change in some
quantity which we cannot observe directly, which we know
to have a definite influence on many other quantities which
we can so observe, tending to increase all, or diminish all,
while this influence is concealed by the action of many
causes affecting the separate quantities in various ways.
Bowley (1926).
PRESENTERS :
PASCUA, LADY EDEM R.
CORTES, STEPHANIE LOUISA PADILLA-TAN
What are INDEX
NUMBERS?
Index numbers are statistical measures designed to show
changes in a variable or group of related variables with
respect to time, geographic location or other characteristics
such as income, profession, etc.
PRESENTERS :
PASCUA, LADY EDEM R.
CORTES, STEPHANIE LOUISA PADILLA-TAN
What are INDEX
NUMBERS?
PRESENTERS :
PASCUA, LADY EDEM R.
CORTES, STEPHANIE LOUISA PADILLA-TAN
What are INDEX
NUMBERS?
INDEX NUMBERS are a widespread disease of modern life ....
It is really questionable - though bordering on heresy to
put the question - whether we would be any the worse
off if the whole bag of tricks were scrapped.
PRESENTERS :
PASCUA, LADY EDEM R.
CORTES, STEPHANIE LOUISA PADILLA-TAN
What are INDEX
NUMBERS?
An INDEX NUMBER is limited to the measure of changes in the
magnitude from one situation to another.
*two time periods (e.g. 2 years)
*two situations in a spatial sense (e.g. 2 regions of a country).
PRESENTERS :
PASCUA, LADY EDEM R.
CORTES, STEPHANIE LOUISA PADILLA-TAN
What are INDEX
NUMBERS?
INDEX NUMBER measure changes which are expressed
with one selected situation as 100.
REFERENCE BASE or COMPARISON BASE
PRESENTERS :
PASCUA, LADY EDEM R.
CORTES, STEPHANIE LOUISA PADILLA-TAN
What are INDEX
NUMBERS?
An INDEX NUMBER is an economic data figure reflecting price or
quantity compared with a standard or base value.
The base usually equals 100; and
the index number is usually expressed as 100 times the ratio to the
base value.
e.g. if a commodity costs twice as much in 1970 as it did in 1960, its
index number would be 200 relative to 1960.
PRESENTERS :
PASCUA, LADY EDEM R.
CORTES, STEPHANIE LOUISA PADILLA-TAN
Classifications of
INDEX NUMBERS?
1) price index numbers - measure the relative changes in
the price of a commodity between two periods. (PYOI/ PBase)
2) quantity index numbers- measure changes in the
physical quantity of goods produced, consumed or sold for
an item or a group of items.
3) value index numbers- not so often used
PRESENTERS :
PASCUA, LADY EDEM R.
CORTES, STEPHANIE LOUISA PADILLA-TAN
Types of INDEX
NUMBERS?
PRESENTERS :
PASCUA, LADY EDEM R.
CORTES, STEPHANIE LOUISA PADILLA-TAN
Types of INDEX
NUMBERS?
1. Simple Index Number:
-is used by economists to measure the relative change in
a single variable, it is termed as Simple Index.
e.g. hourly wages in manufacturing.
PRESENTERS :
PASCUA, LADY EDEM R.
CORTES, STEPHANIE LOUISA PADILLA-TAN
Types of INDEX
NUMBERS?
2. Composite Index Number:
-is used to measure changes in the value of several
variables like price, the volume of production, cost of living,
number of road accidents, etc., is termed as a composite
index.
PRESENTERS :
PASCUA, LADY EDEM R.
CORTES, STEPHANIE LOUISA PADILLA-TAN
Uses of INDEX
NUMBERS?
Index numbers possess much practical importance in
measuring changes in the cost of living, production trends,
trade, income variations, etc.
PRESENTERS :
PASCUA, LADY EDEM R.
CORTES, STEPHANIE LOUISA PADILLA-TAN
Uses of INDEX
NUMBERS?
• Index numbers measure fluctuations during intervals of
time, group differences of geographical position of
degree, etc.
• They are used to compare the total variations in the
prices of different commodities in which the unit of
measurements differs with time and price, etc.
PRESENTERS :
PASCUA, LADY EDEM R.
CORTES, STEPHANIE LOUISA PADILLA-TAN
Uses of INDEX
NUMBERS?
•
They measure the purchasing power of money.
•
They are helpful in forecasting future economic trends.
•
They are used in studying the difference between the
comparable categories of animals, people or items.
PRESENTERS :
PASCUA, LADY EDEM R.
CORTES, STEPHANIE LOUISA PADILLA-TAN
Uses of INDEX
NUMBERS?
•
Index numbers of industrial production are used to
measure the changes in the level of industrial production
in the country.
•
Index numbers of import prices and export prices are
used to measure the changes in the trade of a country.
•
Index numbers are used to measure seasonal variations
and cyclical variations in a time series.
PRESENTERS :
PASCUA, LADY EDEM R.
CORTES, STEPHANIE LOUISA PADILLA-TAN
Limitation of
INDEX NUMBERS?
They are simply rough indications of the relative changes.
PRESENTERS :
PASCUA, LADY EDEM R.
CORTES, STEPHANIE LOUISA PADILLA-TAN
THANK YOU FOR
LISTENING!
PRESENTERS :
PASCUA, LADY EDEM R.
CORTES, STEPHANIE LOUISA PADILLA-TAN