Glossary term
Index Number: Meaning and Definition
Reviewed and approved by Dr. Anamika ShrivastavaPublished Last updated
An index number is a statistical measure of the average change in a group of related variables between two periods. The base period is given the value 100, and the index of another period shows the change relative to it. Price, quantity and value indices are the main types.
In more detail
An index compares a group of related values with a base period. Choosing a normal, recent base year and representative items matters, since an old base or an unrepresentative basket distorts the change. Weighted indices give larger items more influence, as Laspeyres and Paasche indices do.
Example
If the price index is 126 against a base year of 100, prices are 26 per cent higher than in the base year.
Key points
- Base period = 100.
- Weighted indices give importance to larger items.
- Laspeyres uses base-year quantities; Paasche uses current-year quantities.
Common mistake
Comparing two indices with different base years without rebasing.
Related terms
Consumer Price IndexWholesale Price Index
Where it is explained
This term is explained in Class 11 Statistics Chapter 7: Index Numbers.