Index number
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In economic data, an index number, is a figure reflecting price or quantity compared with a standard or base value.[1][2] The base usually equals 100 and the index number is usually expressed as 100 times the ratio to the base value. For example, if a commodity costs twice as much in 1970 as it did in 1960, its index number would be 200 relative to 1960. Index numbers are used especially to compare business activity, the cost of living, and employment. They enable economists to reduce unwieldy business data into easily understood terms.
In economics, index numbers are generally time series summarising movements in a group of related variables. The best-known is the consumer price index which measures changes in retail prices paid by consumers. In some cases, however, index numbers may compare geographic areas at a point in time. An example is a country's purchasing power parity.
There is a substantial body of economic analysis concerning the construction of index numbers, desirable properties of index numbers and the relationship between index numbers and economic theory.
[edit] See also
[edit] Notes
- ^ Diewert, W. E., “Index Numbers”, in Eatwell, John; Milgate, Murray & Newman, Peter, The New Palgrave: A Dictionary of Economics, vol. 2, pp. 767–780
- ^ Moulton, Brent R. & Smith, Jeffrey W., “Price Indices”, in Newman, Peter; Milgate, Murray & Eatwell, John, The New Palgrave Dictionary of Money and Finance, vol. 3, pp. 179–181
[edit] References
- Robin Marris, Economic Arithmetic, (1958).
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