Index Numbers
Class 11 · Economics
4 ideas in Class 11 Economics, explained in plain words, with games and quizzes to practise.
Index Numbers Meaning
Part of: Meaning and Simple Indices
Index numbers average relative change; base year anchors 100; rises signal inflation; governments index wages and policy to them.
Why it matters. Single figures track prices. Base anchors comparison.
Key words
- Index number
- : A single number tracking average change in a group of variables.
- Base year
- : The reference year fixed at 100 for comparison.
- Inflation
- : A sustained rise in the general price level.
- Cost of living
- : The basket cost families face for daily living.
Try it in two minutes
- Fix the base year.
- Average relatives.
- Read the rise.
Try at home. Track snack prices weekly.
Simple Index Computation
Part of: Meaning and Simple Indices
Relatives divide current by base; simple average means equal weights; quantity shifts distort unweighted picks; worked baskets show method.
Why it matters. Hand computation builds feel. Weights fix bias.
Formulas
- Price relative = (current price / base price) x 100
- Simple index = mean of the price relatives
Key words
- Price relative
- : One item price as a percent of its base-year price.
- Simple average of relatives
- : Averaging relatives while treating all items as equal.
- Unweighted index
- : An index giving no item more weight than another.
- Basket
- : The fixed set of items whose prices are tracked.
Try it in two minutes
- Relative each item.
- Average equally.
- Spot weight bias.
Try at home. Index three groceries.
Laspeyres Paasche Fisher
Part of: Weighted Indices
Laspeyres fixes base quantities; Paasche fixes current; Fisher roots their product; weights mirror expenditure shares.
Why it matters. Baskets age fast. Ideal blends both.
Formulas
- Laspeyres = sum(p1 x q0) / sum(p0 x q0) x 100
- Paasche = sum(p1 x q1) / sum(p0 x q1) x 100
- Fisher = root(Laspeyres x Paasche)
Key words
- Laspeyres index
- : An index weighing prices by base-year quantities.
- Paasche index
- : An index weighing prices by current-year quantities.
- Fisher index
- : The geometric mean of Laspeyres and Paasche indices.
- Base weight
- : Quantities from the base year used as weights.
- Current weight
- : Quantities from the current year used as weights.
Try it in two minutes
- Fix base basket.
- Fix current basket.
- Root the product.
Try at home. Weigh your grocery basket.
CPI WPI and Limits
Part of: Weighted Indices
CPI tracks retail baskets for workers; WPI tracks wholesale; base shifts re-anchor years; quality change and new goods escape fixed baskets.
Why it matters. CPI sets wages. Limits warn misread.
Formulas
- An index above 100 means prices rose since the base year
Key words
- CPI
- : An index tracking retail prices paid by workers.
- WPI
- : An index tracking wholesale market prices.
- Base shift
- : Moving the index to a newer reference year.
- Quality bias
- : Error when better products replace old ones in the basket.
Try it in two minutes
- Track retail basket.
- Shift base years.
- Note missing goods.
Try at home. Compare CPI news monthly.
What your child will practise
- CPI WPI and Limits: Desert Puzzle (Clue Puzzle)
- CPI WPI and Limits: Desert Quick Fire (Quick Fire)
- Index Numbers Meaning: Space Puzzle (Clue Puzzle)
- Laspeyres Paasche Fisher: Candy Quest (Flip and Match)
- Simple Index Computation: Jungle Quick Fire (Quick Fire)
- Quiz: CPI WPI and Limits (8 questions)
- Quiz: Index Numbers Meaning (8 questions)
- Quiz: Laspeyres Paasche Fisher (8 questions)
- Quiz: Simple Index Computation (8 questions)