1. What Is Index Number Calculation?

Index number calculation is a statistical method used to measure relative changes in variables over time or across different locations. It compares current values to a base period value to show percentage changes.

2. How Does The Calculator Work?

The calculator uses the index number formula:

Where:

• \( Current \) — Current period value
• \( Base \) — Base period value
• \( 100 \) — Scaling factor to express as percentage

Explanation: The formula calculates the percentage relationship between current and base values, where 100 represents no change from the base period.

3. Importance Of Index Numbers

Details: Index numbers are crucial in economics, finance, and statistics for tracking price changes, economic indicators, stock market performance, and measuring inflation through indices like CPI and GDP deflator.

4. Using The Calculator

Tips: Enter both current and base values in the same units. Values must be positive numbers greater than zero. The result shows the index number as a percentage relative to the base period.

5. Frequently Asked Questions (FAQ)

Q1: What does an index number of 120 mean?
A: An index of 120 indicates that the current value is 20% higher than the base value (120 - 100 = 20% increase).

Q2: How is the base period selected?
A: The base period is typically a normal or representative period that serves as a standard for comparison. It's often set to 100 for easy interpretation.

Q3: What are common applications of index numbers?
A: Consumer Price Index (CPI), stock market indices, production indices, inflation measurement, and economic indicator tracking.

Q4: Can index numbers be less than 100?
A: Yes, an index below 100 indicates the current value is lower than the base value (e.g., index of 85 means 15% decrease).

Q5: What are the limitations of simple index numbers?
A: Simple index numbers don't account for quality changes, product substitution, or weighting of different components in composite indices.