1. What Are Index Numbers?

Index numbers are statistical measures designed to show changes in a variable or group of variables over time, relative to a base period. They are widely used in economics, finance, and business to track price changes, production levels, and other economic indicators.

2. How Does The Calculator Work?

The calculator uses the standard index number formula:

Where:

• \( Current\ Value \) — The value in the current period
• \( Base\ Value \) — The value in the base period (reference point)
• \( 100 \) — Base index value

Explanation: The formula calculates the percentage change relative to the base period. An index of 100 indicates no change from the base period, while values above or below 100 indicate increases or decreases respectively.

3. Importance Of Index Numbers

Details: Index numbers are essential for measuring inflation (Consumer Price Index), tracking economic growth (GDP deflator), comparing purchasing power, and making informed business decisions. They provide a standardized way to compare data across different time periods.

4. Using The Calculator

Tips: Enter the current value and base value in the same units. Both values must be positive numbers. The calculator will compute the index number as a percentage relative to the base period.

5. Frequently Asked Questions (FAQ)

Q1: What does an index number of 125 mean?
A: An index of 125 indicates that the current value is 25% higher than the base value, representing a 25% increase from the base period.

Q2: Why is 100 used as the base?
A: Using 100 as the base makes interpretation intuitive - values above 100 represent increases, values below 100 represent decreases from the base period.

Q3: Can index numbers be used for quantity comparisons?
A: Yes, index numbers can measure changes in both prices (price indices) and quantities (quantity indices), making them versatile tools for economic analysis.

Q4: What are common types of index numbers?
A: Common indices include Consumer Price Index (CPI), Producer Price Index (PPI), GDP deflator, stock market indices, and purchasing power parity indices.

Q5: How often should base periods be updated?
A: Base periods are typically updated every 5-10 years to maintain relevance, as very old base periods can distort comparisons due to structural economic changes.