Determining the Index Number

When determining index numbers, we are faced with certain difficulties. This problem arises

From the use of index numbers, which are summary single numbers encapsulating a range of values

And used to describe succinctly changes in the range of values over time. The retail prices index, for

instance, could equally rationally, for the above purpose, be calculated as a base-weighted or*

current-weighted index, but the two types of index do not necessarily give the same answer. Far

instance, consider a simple example of two goods X and Y which have the following prices ani;

quantities purchased in the base year 1 and the current year 2:

Year

Goods

Year 1 Year 2 1

Price Quantity Price Quantity 1

X Юр 5 8p 6 1

Y 20p 5 25p 1 1

The current-weighted index is given by:

(8p x 6) + (25p x l) 73

Year 2 = ----------------------- = —= 0.91 (Year 1 = 100)

(Юр x 6) + (20p x 1) 80

The base-weighted index is given by:

(8p x 5) + (25p x 5) 165

Year 2 = ----------------------- = — = 1.10 (Year 1 = 100)

(Юр x 5) + (20p x 5) 150

According to the base-weighted index, the general level of prices rose in year 2 compared with

Year 1 (by 10 per cent), but according to the current-weighted index, prices fell in year 2 (by 9 per

Cent).

Commentary and Notes to Text 17.7.1.2

Summary single numbers — суммарные числа (сводные)

2. to encapsulate = to enclose — заключать

A range of values — диапазон значений

Succinctly — сжато, кратко

Retail prices — розничные цены

A base-weighted index — базовый взвешенный индекс (показатель)