EduAdda By Sailesh Goenka

INDEX NUMBER
Class 11 - Economics

1. _________ reflects on the price change experienced by families of people. [1]

a) weighted average price b) none

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c) consumer price index d) whole sale price index
2. A composite price index based on the prices of a group of items is known as the [1]

a) Laspeyres Index b) CPI

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c) Paasche Index d) Aggregate price index
3. From the following which is not a problem in the construction of Index numbers? [1]
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a) selection of commodities b) understanding of the purpose

c) selection of base ka d) selection of price

ab

4. A composite price index where the prices of the items in the composite are weighted by their relative importance [1]
is known as the
en
a) weighted aggregate price index b) CPI
dd

c) price relative d) Aggregate price index

5. Index numbers are calculated in terms of [1]
uA

a) Percentage b) Times

c) Data d) Ratio
Ed

6. Suppose we want to know the average changes in the price of a set of commodities in 2010 with respect to the [1]
prices of same set of commodities in 2008. In this case what will be the base year?

a) 2010 b) 2000

c) 2008 d) None
7. A monthly price index that uses the price changes in consumer goods and services for measuring the changes in [1]
consumer prices over time is known as the

a) Laspeyres Index b) CPI

c) Paasche Index d) IIP

8. Which of the following index numbers is based on the assumption that all the commodities are of equal [1]
importance?

a) Weighted index number and Simple index b) Simple index number

number

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 c) None of the given d) Weighted index number
9. Consumer Price Index (CPI) is expressed in terms of: [1]

a) b)
∑ Pn qn ∑ P1 q0
× 100 × 100
∑ Po qn ∑ P0 q0

c) ∑ P0 q0
d) ∑ Pn qn

∑ Pn q0 ∑ Po qn

10. In most of the weighted index numbers, the weight pertains to: [1]

a) Both base and current year b) base year or current year .

c) Base year d) current year

11. Historically the first index number is constructed in the year______ [1]

a) 1881 b) 1921

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c) 1764 d) 1776
12. The base year for index numbers should be___________ [1]

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a) a year only b) a period at distant part

c) normal period Go y S d) none

13. Index numbers are very helpful in comparing the economic conditions of a particular group of people [1]
for____different periods.

a) Four ka b) Two
ab

c) Three d) Five
14. Cost of living index is known as ________ [1]
en
a) both consumer price index and cost price b) Commodity price index
dd

index

c) cost price index d) consumer price index

uA

15. Most frequently used index number formula are [1]

a) fixed weighted formula b) Variable weighted formula

Ed

c) weighted formula d) unweighted formula

16. Commodities which show considerable price fluctuations could be best measured by a_________ [1]

a) value index b) price index

c) quality d) quantity index

17. Index number serves as a ____ for measuring the value of money. [1]

a) Barometer b) None of the given

c) Both parameter and barometer d) Parameter

18. In Laspear’s Index number ______ year quantities are used [1]

a) previous b) Average

c) Current d) Base
19. WPI means_________ [1]

a) weighted price index b) whole price index

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 c) wholesale price index d) world price index
20. Comparison is made between base year and ___________is called index number of prices [1]

a) current year b) actual year

c) past year d) none

21. In index number current year quantity is denoted by __________ [1]

a) p0 b) q0

c) p1 d) q1
22. Index numbers help in _________ [1]

a) All of these b) deflating values

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c) policy formation d) studying the trends
23. The____value of index number is a pure number. [1]

a) Price relative b) Commodity

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c) Average d) All of the given
24. The industrial development of a country is reflected by __________ [1]
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a) index of cost of living b) index of industrial production

c) weighted price index ka d) All of these

ab

25. Index of industrial production is a _____ of quantitative relative. [1]

a) Weighted average b) Simple average

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c) Both simple and weighted average d) None of the given
dd

26. Calculate weighted aggregative price index number from the following data using Paasche’s method. [3]

Base Year Current Year

uA

Commodity
Price (Rs.) Quantity Price (Rs.) Quantity

A 10 30 12 50
Ed

B 8 15 10 25

C 6 20 6 30

D 4 10 6 20

27. “Index numbers measures the changes in the variables under study.” Name some of the variables in which the [3]
changes are studied.
28. Name and briefly explain two systems of weighting for construction of weighted index number. [3]
29. A price index of two items of A and B is being estimated. If two items are assigned weights of 64 and 36 [3]
respectively, then the price index becomes 279. Similarly, if they are assigned weights of 50 each, then the price
index turns out to be 265. Determine the individual price index number of items A and B.
30. In how many groups, different commodities have been divided while constructing the Wholesale Price Index in [3]
India?
31. What is the difference between a price index and a quantity index? [3]
32. The monthly per capita expenditure incurred by workers for an industrial centre during 1980 and 2005 on the [3]

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 following items are given below. The weights of these items are 75,10, 5, 6 and 4 respectively. Prepare a
weighted index number for cost of living for 2005 with 1980 as the base.

Items Price in 1980 Price in 2005

Food 100 200

Clothing 20 25

Fuel & lighting 15 20

House rent 30 40

Mise 35 65

33. Write any three uses of index number especially in economics. [3]

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34. What methods are used for constructing Consumer Price Index number? [3]
35. Explain NIFTY, SENSEX, HDI and Producer Price Index. [3]
36. From the following data, construct a weighted index number for 2015 with 2005 as base year. [4]

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Price (in Rs.)
Commodity Weight
2005 2015
Go y S
Wheat 15 10 15

Rice 10 8 16
ka
ab

Pulses 5 5 10

Milk 4 2 4
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Oil 6 4 6
dd

sugar 7 3 6

Salt 3 1 2
uA

37. Calculate weighted index number for 2016 by weighted average of relative method for the following data. [4]

Items Weight Price in 2015 (Rs.) Price in 2016 (Rs.)

Ed

A 10 100 161

B 7 200 210

C 15 50 60

D 9 20 30

E 10 10 14

38. Construct index number of price from the data given below by applying [4]
i. Laspeyre's Method
ii. Paasche's Method
iii. Fisher's Method

Base Year Current Year

Commodity
Price (in Rs.) Quantity Price (in Rs.) Quantity

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 A 2 40 3 20

B 1.5 30 2.5 40

C 1 50 1.5 30

D 2.5 20 2 80

39. The price quotation of different commodities for 2014 and 2015 are given below. Calculate the index number for [4]
2015 with 2014 as base year by using
i. Simple Average of Price Relative
ii. Weighted Average of Price Relative

Price (Rs.)
Commodity Unit Weight

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2014 2015

A kg 5 2.00 4.50

B quintal 7 2.50 3.20

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C dozen 6 3.00 3.50

D kg 2 1.00 1.80
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40. What weights are given to different industries in Index of Industrial Production(IIP)? [4]
41. Write the formulae for Lasperey's, Paasche's and fisher's quantity index numbers.
ka [4]
ab

42. What are the main steps in construction of consumer price index? [4]
43. Calculate weighted average of price relative index from the following data. [4]
en
Item Weight (in %) Base Year Price (Rs.) Current Year Price (Rs.)
dd

A 40 2 4

B 30 5 6
uA

C 20 4 5

D 10 2 3
Ed

44. Define index number. Give some of its uses. [4]

45. Construct index number of industrial production from the following data. [4]

Output
Industry
Base Year Current Year Weight

Manufacturing production 122 300 85

Electrical products 203 400 5

Mining 65 87 10

46. Distinguish between simple aggregative index and simple average of relatives. [4]
47. Calculate the weighted average of price relative index for 2016 on the basis of 2012 from the following data. [4]

p0 p1
Commodity W
2012 2016

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 A 10 15 20

B 8 10 12

C 6 5 8

D 6 10 13

E 4 4 5

48. Index numbers are constructed with certain specific objectives. So, their use is limited. In the context of this [6]
statement, discuss any four limitations of index numbers.
49. What do you understand by absolute change, relative change and net change? [6]
50. Discuss in brief, the methods of constructing weighted index numbers. [6]
51. Explain briefly the various characteristics or features of index numbers. [6]

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52. Construct index number by simple average of price relative method for 2016 taking the price of 2011 as base [6]
from the data given below.

Price in (Rs.)

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Commodity
Go y S 2011 2016

A 30 45

B 40 50

C 60 72
ka
ab

D 80 88
en
E 10 13
dd

53. A department store sells stereo systems, television sets and radios. The percentage distribution of the total sales [6]
volume (in Rs.) is estimated as 30% stereos, 50% televisions and 20% radios. The price of one stereo, one
television and one radio in 2009 was Rs. 20,000, Rs. 15,000 and Rs. 500 respectively, while their respective
uA

price in 2012 was Rs. 25,000, Rs.20,000 and Rs. 800. A weighted price index for 2012 with base 2009 is to be
computed.
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i. Which index number formula is appropriate? Why?

ii. Compute the index.
54. Why is it essential to have different CPI for different categories of consumers? [6]
55. Given the following data- [6]

CPI of industrial workers CPI of agricultural labourers (1986-87 = WPI (1993-94 =

Year
(1982=100) 100) 100)

1995–
313 234 121.6
96

1996–
342 256 127.2
97

1997-
366 264 132.8
98

1998- 414 293 140.7

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 99

1999-
428 306 145.3
00

2000-
444 306 155.7
01

2001-
463 309 161.3
02

2002-
482 319 166.8
03

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2003-
500 331 175.9
04

Source: Economic Survey, 2004-2005, Government of India

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i. Comment on the relative values of the index numbers.
ii. Are they comparable?
56. Why do we need an index number? [6]
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57. Given the following data. [6]

Base Year Current Year

Item ka
ab

Price (Rs.) Quantity Price (Rs.) Quantity

A 1 10 2 5
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B 1 5 x 2
dd

Find x, if the ratio between Laspeyre’s and Paasche’s index number is 28:27.
58. Construct index number of price for the year price of 2016 from the following data by [6]
uA

i. Laspeyre’s Method
ii. Paasche's Method
iii. Fisher's Method
Ed

2008 2016

Commodity Price Quantity Price Quantity

A 10 30 12 35

B 9 10 11 15

C 8 15 10 20

D 6 20 7 25

59. The monthly expenditure (₹) of a family on some important items and the Goods and Services Tax (GST) rates [6]
applicable to these items is as follows:

Item Monthly Expense(₹) GST Rate %

Cereals 1500 0

Eggs 250 0

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 Fish, Meat 250 0

Medicines 50 5

Biogas 50 5

Transport 100 5

Butter 50 12

Babool 10 12

Tomato Ketchup 40 12

Biscuits 75 18

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Cakes, Pastries 25 18

Branded Garments 100 18

Vacuum Cleaner, Car 1000 28

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Calculate the average tax rate as far as this family is concerned.
The calculation of the average GST rate makes use of the formula for weighted average. In this case, the weights
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are the shares of expenditure on each category of goods. The total weight is equal to the total expenditure of the
family. And the variables are the GST rates.

Category Expenditure Weight (w)

ka GST Rate (x) WX
ab

Category 1 2000 0 0

Category 2 200 0.05 10

en
dd

Category 3 100 0.12 12

Category 4 200 0.18 36

uA

Category 5 1000 0.28 280

3500 338

The mean GST rate as far as this family is concerned is (338)/(3500) = 0.966 i.e. 9.66%
Ed

60. Calculate the cost of living index number using family budget method. [6]

Commodity Wheat Rice Pulses Ghee sugar Oil Fuel Clothes

Units Consumed in Base Year 200 50 56 20 40 50 60 40

Price in Rs. (Base Year) 1.0 3.0 4.0 20.0 2.5 10.0 2.0 15.0

Price in Rs. (Current Year) 1.2 3.5 5.0 30.0 5.0 15.5 2.5 18.0

61. Define a wholesale index number. What are its uses? [6]
62. Explain the various steps involved in the construction of index number on industrial production. [6]
63. Construct the following indices by taking 2014 as the base year [6]
i. Simple Aggregative Price Index
ii. Index of Average of Price Relative

Item A B C D E

Price in 2014 (Rs.) 6 2 4 10 8

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 Price in 2015 (Rs.) 10 2 6 12 12

Price in 2016 (Rs.) 15 3 8 14 16

64. An enquiry into the budgets of the middle class families in a certain city gave the following information; [6]

Expenses on items Food 35% Fuel 10% Clothing 20% Rent 15% Misc. 20%

Price (in ₹) in 2004 1500 250 750 300 400

Price (in ₹) in 1995 1400 200 500 200 250

What is the cost of living index during the year 2004 as compared with 1995?
65. Define wholesale price index numbers. Give its uses. [6]
66. i. Give reason as to why weighted index number is generally preferred to an unweighted index number? [6]

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ii. Find the consumer price index or cost of living index number for the current year from the following data by
aggregative expenditure method.

Base Year Current Year

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Commodity Price Quantity Price Quantity

A 2 12 4 5
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B 5 12 6 10

C ka 4 20 5 15
ab

D 3 10 3 10

67. i. Define price index number. How are these different from quantity index number? [6]
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ii. Find out the price index of the year 2015 assuming 2014 as the base year of the following data by using
dd

simple average of price relative method.

Commodity Price in 2014 (Rs.) Per Quintal Price in 2015 (Rs.) Per Quintal
uA

Wheat 800 900

Sugar 1100 1200

Ed

Rice 400 600

Potato 500 700

Salt 300 500

68. i. Write any three uses of index number especially in economics. [6]
ii. Calculate the weighted average of price relative index for 2016 on the basis of 2012 from the following data.

p0 p1
Commodity W
2012 2016

A 10 15 20

B 8 10 12

C 6 5 8

D 6 10 13

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 E 4 4 5

69. i. What factors are considered while selecting price quotations? [6]
ii. From the following data, construct a weighted index number for 2015 with 2005 as base year.

Price (in Rs.)

Commodity Weight
2005 2015

Wheat 15 10 15

Rice 10 8 16

Pulses 5 5 10

Milk 4 2 4

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Oil 6 4 6

sugar 7 3 6

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Salt 3 1 2

70. i. Which method is considered ‘ideal’ for constructing index number and why? [6]
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ii. Construct the index number by simple average of price relative method and by simple aggregative method.

Commodity A B C D E
ka
ab

Price in 2014 (Rs.) 16 40 35 5.25 2

Price in 2015 (Rs.) 12 60 50 6.25 1.5

en
71. i. Define price index number. How are these different from quantity index number? [6]
dd

ii. With the help of the following data, calculate index number for 2016 taking 2011 as base year.

Commodity Price in 2011 (in Rs.) Price in 2016 (in Rs.)

uA

A 100 145

B 90 130
Ed

C 145 200

D 180 275

E 85 150

72. i. Index numbers are 'economic barometers'. Explain this statement. [6]
ii. Construct the consumer price index number for 2011 on the basis of the following data using family budget
method.

Items Price in 2000 (Rs.) Price in 2011 in (Rs.) weight

Food 200 280 30

Rent 100 200 20

Clothing 150 120 20

Fuel and lighting 50 100 10

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 Miscellaneous 100 200 20

73. i. What methods are used for constructing Consumer Price Index number? [6]
ii. Construct index number of 2015 from the given data by the simple aggregative method and the simple
average of relative method.

Commodity A B C D E F

Price in 2015 (Rs.) 10 18 16 14 12 17

Price in 2010 (Rs.) 8 15 12 10 8 12.5

74. i. Give the limitations of simple aggregative method of computing index number. [6]
ii. Construct index number of industrial production from the following data.

esh
Output
Industry
Base Year Current Year Weight

Manufacturing production 122 300 85

ail
Electrical products 203 400 5

Mining 65 87 10
Go y S
75. i. Explain the concept of deflating using index numbers. [6]
ii. The price paid and quantities purchased by a household in base and current years are given below. Calculate
ka
ab

the additional dearness allowance to be given to the household so as to fully compensate it for the price rise,
using both the Laspeyre’s and Paasche’s index number.
en
Base Year Current Year
dd

Commodity
Price (Rs.) Quantity Price (Rs.) Quantity

A 30 10 40 8
uA

B 12 20 15 18
Ed

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