Several formulae have been suggested for constructing index numbers and the problem is that of selecting the most appropriate one in a given situation. The different tests are the unit test, time reversal test, factor reversal test, and circular test. Unit Test: This test states that the formula for constructing an index number should be […]
Management > Managerial Statistics > Index Number By Kelly’s Method and Walsh’s Method Kelly’s Method: Truman L. Kelly has suggested the following formula for constructing index number. Here weights are the quantities which may refer to some period, not necessarily the base year or current year. Thus the average quantity of two or more years […]
Management > Managerial Statistics > Index Number By Marshall Edgeworth Method The Marshall Edgeworth Method for the index number, credited to Marshall (1887) and Edgeworth (1925), is a weighted relative of the current period to base period sets of prices. This index uses the arithmetic average of the current and based period quantities for weighting. Price Index by Marshall Edgeworth Method: […]
Management > Managerial Statistics > Index Number By Fisher’s Method Laspeyre’s method is based on fixed weights of the base year. For price index base year’s quantities are used as weights. Paasche’s method is based on fixed weights of the current year. For price index, current year’s quantities are used as weights. Fisher has suggested […]
Management > Managerial Statistics > Index Number By Dorbish and Browley’s Method Laspeyre’s method is based on fixed weights of the base year. For price index base year’s quantities are used as weights. Paasche’s method is based on fixed weights of the current year. For price index, current year’s quantities are used as weights. Dorbish […]
Management > Managerial Statistics > Index Number By Paasche’s Method Price Index Number by Paasche’s Method: Paasche’s method is based on fixed weights of the current year. For price index current year’s quantities are used as weights. Steps involved: Denote prices of the commodity in the current year as P1 and its quantity consumed in […]
Management > Managerial Statistics > Index Number By Larpeyre’s Method When all commodities are not of equal importance, we assign a weight to each commodity relative to its importance and the index number computed from these weights is called a weighted index number. For example, when calculating the price index number if the price of […]
Management > Managerial Statistics > Index Number By Simple Average of Relative Method Simple Average of Relative Method Using Arithmetic Mean: In this method, average of price relative of commodity is calculated. Steps involved Find price relative for each commodity for the current year using the formula R = (P1 / P0) × 100. Add […]
Management > Managerial Statistics > Index Number By Simple Aggregative Method In Simple Aggregative Method, the total price of commodities in a given (current) year is divided by the total price of commodities in a base year and expressed as a percentage. Steps involved in Simple Aggregative Method: Add the prices of all the commodities […]
Management > Managerial Statistics > Construction of Index Number Following are the steps involved in the construction of index number Purpose of index number: The steps which are taken in the construction of index number generally depend on the purpose of the index number. Hence the purpose of index numbers must be defined clearly, perfectly […]