{"id":87963,"date":"2021-06-17T15:35:22","date_gmt":"2021-06-17T10:05:22","guid":{"rendered":"https:\/\/kseebsolutions.guru\/?p=87963"},"modified":"2021-07-02T16:40:15","modified_gmt":"2021-07-02T11:10:15","slug":"1st-puc-economics-question-bank-chapter-8-part-1","status":"publish","type":"post","link":"https:\/\/kseebsolutions.guru\/1st-puc-economics-question-bank-chapter-8-part-1\/","title":{"rendered":"1st PUC Economics Question Bank Chapter 8 Index Numbers"},"content":{"rendered":"

Karnataka 1st PUC Economics Question Bank Chapter 8 Index Numbers<\/h2>\n

1st PUC Economics Index Numbers TextBook Questions and Answers<\/h3>\n

I. Choose the correct answers (each question carries 1 mark)<\/span><\/p>\n

Question 1.
\nThe index number is a
\n(a) Measure of relative changes
\n(b) A special type of an average
\n(c) A percentage relative
\n(d) All the above
\nAnswer:
\n(a) Measure of relative changes<\/p>\n

\"1st<\/p>\n

Question 2.
\nThe formula P01<\/sub> = \\(\\frac{\\Sigma P_{1} Q_{0}}{\\sum P_{0} Q_{0}}\\) \u00d7 100 was given by
\n(a) Laspeyres
\n(b) Paasche
\n(c) Marshal
\n(d) Fisher
\nAnswer:
\n(a) Laspcrcs<\/p>\n

Question 3.
\nState the basic difficulty in constructing index numbers
\n(a) Selection of commodities
\n(b) Selecting of base year
\n(c) Selection of prices
\n(d) All of these
\nAnswer:
\n(b) Selecting of the base car<\/p>\n

Question 4.
\nIn the index number of which year price is assumed to be 100?
\n(a) Current year
\n(b) Base year
\n(c) Selection of prices
\n(d) %one of these
\nAnswer:
\n(b) Base year<\/p>\n

Question 5.
\nIndex numbers are related to
\n(a) General problems
\n(b) No problem
\n(c) Particular problem
\n(d) one of these
\nAnswer:
\n(a) General problems<\/p>\n

\"1st<\/p>\n

Question 6.
\nLaspeyres index is based on
\n(a) Base year quantity
\n(b) Current year quantity
\n(c) Both of them
\n(d) Average of current and base
\nAnswer:
\n(a) Base year quantity<\/p>\n

Question 7.
\nPaasche index is based on
\n(a) Current year quantity
\n(b) Base year quantity
\n(c) Both of them
\n(d) None of these
\nAnswer:
\n(a) Current year quantity<\/p>\n

Question 8.
\nPurchasing power of money is equal to
\n(a) Price index
\n(b) \\(\\frac{1}{\\text { cost of living index }}\\)
\n(C) Quantity index
\n(d) Wages
\nAnswer:
\n(a) Price index<\/p>\n

Question 9.
\nThe consumer price index is also known as
\n(a) Price of living index
\n(c) Consumer price index
\n(b) Cost of living index
\n(d) All of these
\nAnswer:
\n(b) Cost of living index<\/p>\n

\"1st<\/p>\n

II. Fill in the blanks (each question carries 1 mark)<\/span><\/p>\n

Question 1.
\nIndex numbers help in the framing of ……………………….
\nAnswer:
\nEconomic policy<\/p>\n

Question 2.
\nIndex numbers are expressed in …………………….
\nAnswer:
\nPercentages<\/p>\n

Question 3.
\nInflation affects the ……………….. of common people.
\nAnswer:
\nCost of living<\/p>\n

Question 4.
\nThe rise in Sensex reflects the ………..of the economy.
\nAnswer:
\nGood health<\/p>\n

Question 5.
\nCPI measures the average change in ……………
\nAnswer:
\nRetail prices<\/p>\n

Question 6.
\nA weighted aggregative price index uses ……………… quantities as weights.
\nAnswer:
\nBase period<\/p>\n

\"1st<\/p>\n

Question 7.
\nUsing current year quantities as weights are known as……………..
\nAnswer:
\nPaasche Price Index<\/p>\n

Question 8.
\nIndex number becomes a……………. when the relative importance of items are taken care of.
\nAnswer:
\nWeighted index<\/p>\n

Question 9.
\nP1 and P0 indicate the price of the commodity in the current and ……… period respectively.
\nAnswer:
\nBase<\/p>\n

III. Match the following (total 5 marks)<\/span><\/p>\n

Question 1.<\/p>\n\n\n\n\n\n\n\n\n
A<\/strong><\/td>\nB<\/strong><\/td>\n<\/tr>\n
1. CPI<\/td>\n(a) Producer price index<\/td>\n<\/tr>\n
2. WPI<\/td>\n(b) Agriculture price index<\/td>\n<\/tr>\n
3. IPI<\/td>\n(c) Consumer price index<\/td>\n<\/tr>\n
4. API<\/td>\n(d) Wholesale price index<\/td>\n<\/tr>\n
5. PPI<\/td>\n(e) Industrial production index<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Answer:<\/p>\n\n\n\n\n\n\n\n\n
A<\/strong><\/td>\nB<\/strong><\/td>\n<\/tr>\n
1. CPI<\/td>\n(c) Consumer price index<\/td>\n<\/tr>\n
2. WPI<\/td>\n(d) Wholesale price index<\/td>\n<\/tr>\n
3. IPI<\/td>\n(c) Consumer price index<\/td>\n<\/tr>\n
4. API<\/td>\n(b) Agriculture price index<\/td>\n<\/tr>\n
5. PPI<\/td>\n(a) Producer price index<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

IV. Answer the following questions in a word\/sentence (each question carries 1 mark).<\/span><\/p>\n

Question 1.
\nWhat is an index number?
\nAnswer:
\nAn index number is a statistical device for measuring changes in the magnitude of a group of related variables.<\/p>\n

Question 2.
\nState any one feature of index number.
\nAnswer:<\/p>\n

    \n
  • Index number measures changes in the value of the variables,<\/li>\n
  • Index numbers are specialized averages.<\/li>\n<\/ul>\n

    \"1st<\/p>\n

    Question 3.
    \nDefine base year.
    \nAnswer:
    \nThe base year is the period with which the comparison is to be made while calculating index numbers.
    \nIn other words, it is the reference period from which an index number is calculated.<\/p>\n

    Question 4.
    \nWhat is price relative?
    \nAnswer:
    \nPrice relative refers to percentages of current prices with reference to base year prices.<\/p>\n

    Question 5.
    \nWhere can we get some important index numbers such as CPI, WPI, liP, etc?
    \nAnswer:
    \nWe can get CPI, WPT. liP etc., from economic survey<\/p>\n

    Question 6.
    \nDefine the current year.
    \nAnswer:
    \nThe current year is that period which \u00a1s the present financial year taken for the purpose of calculating index numbers.<\/p>\n

    Question 7.
    \nWhat is inflation?
    \nAnswer:
    \nA general rise in the price of all goods and services is called inflation.<\/p>\n

    Question 8.
    \nGive the formula to calculate the weekly inflation rate.
    \nAnswer:
    \nTo calculate the weekly inflation rate, the following formula is used:
    \nRate of inflation = \\(\\frac{\\text { Current year WPI – Previous year WPI }}{\\text { Previous year WPI }}\\)<\/p>\n

    Question 9.
    \nWrite the formula to calculate the index of Industrial Production.
    \nAnswer:
    \nTo calculate index of industrial Production, the following formula is used:
    \nIndex of industnal production = \\(\\frac{\\Sigma q_{1} \\times \\mathrm{W}}{\\Sigma \\mathrm{W}}\\)<\/p>\n

    \"1st<\/p>\n

    Question 10.
    \nIn which index number is there relative importance of the items?
    \nAnswer:
    \nThe consumer price index has the relative importance of the items.<\/p>\n

    Question 11.
    \nWhich item is having the highest weight in CPI for an industrial worker?
    \nAnswer:
    \nFood and beverages have the highest weight in CPI for industrial workers.<\/p>\n

    Question 12.
    \nWhat does Wholesale Prices Index indicate?
    \nAnswer:
    \nThe wholesale prices index indicates the change in the general price level.<\/p>\n

    Question 13.
    \nWhat does the Consumer Price Index number reflect?
    \nAnswer:
    \nThe consumer price index number reflects the average change in retail prices.<\/p>\n

    Question 14.
    \nMention the types of price index numbers.
    \nAnswer:
    \nThe types of Price index numbers are:<\/p>\n

      \n
    • Consumer price index number which includes, wholesale price index numbers and retail price index numbers.<\/li>\n
    • Quantity index numbers<\/li>\n
    • Value index numbers<\/li>\n
    • Industrial production index<\/li>\n
    • Agricultural production index<\/li>\n
    • Sensitive Index – (SENSEX)<\/li>\n
    • Producer price index.<\/li>\n<\/ul>\n

      Question 15.
      \nWhat is the difference between unweighted and weighted index numbers?
      \nAnswer:<\/p>\n\n\n\n\n
      Unweighted Index Numbers<\/strong><\/td>\nWeighted Index Numbers<\/strong><\/td>\n<\/tr>\n
      Here each item is supposed to have the same weight as no weight is expressly assigned to any item.<\/td>\nHere, while constructing weighted index numbers, rational weights are assigned to all items in an explicit manner.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

      Question 16.
      \nWhat is SENSEX?
      \nAnswer:
      \nSensex is the short form of the Bombay Stock Exchange Sensitive Index with 1978-79 as a base. It is the benchmark index for the Indian stock market.<\/p>\n

      \"1st<\/p>\n

      Question 17.
      \nWhich index do the industrialists use in recent times instead of the Wholesale Price Index?
      \nAnswer:
      \nThe industrial production index is being used by industrialists in recent times instead of the wholesale Price Index.<\/p>\n

      V. Answer the following questions in about four sentences (each question carries 2 marks)<\/span><\/p>\n

      Question 1.
      \nWrite any four features of index numbers.
      \nAnswer:
      \nThe four features of index numbers are as follows:<\/p>\n

        \n
      • Index numbers are specialized averages<\/li>\n
      • Index numbers are expressed in percentages<\/li>\n
      • Index numbers measure the effect of changes in relation to time or place<\/li>\n
      • Index numbers measure the changes not capable of direct measurement.<\/li>\n<\/ul>\n

        Question 2.
        \nWhat is the price index number? Mention its types.
        \nAnswer:
        \nPrice index numbers measure the general changes in prices between the current year and the base year. The general price index is used to measure the value of money. The following are the different types of price index numbers:<\/p>\n

          \n
        • Consumer price index<\/li>\n
        • Wholesale price index<\/li>\n
        • Retail price index<\/li>\n
        • Producer price index.<\/li>\n<\/ul>\n

          Question 3.
          \nWhy the simple aggregative price index is of limited use?
          \nAnswer:
          \nThe simple aggregative price index is of limited use because the units of measurement of prices of various commodities are not the same. It is unweighted because the relative importance of the items has not been properly reflected. The items are treated as having equal importance or weight. But, in reality, the items purchased differ in order of importance.<\/p>\n

          \"1st<\/p>\n

          For instance, food occupies a large proportion of our expenditure. In that case, an equal rise in the price of an item with a large weight and that of an item with low weight will have different implications for the overall change in the price index.<\/p>\n

          Question 4.
          \nMention some important index numbers.
          \nAnswer:
          \nFollowing are a few important index numbers:<\/p>\n

            \n
          • Consumer price index<\/li>\n
          • SENSEX<\/li>\n
          • Industrial production index<\/li>\n
          • Wholesale price index<\/li>\n
          • Producer price index<\/li>\n
          • Agricultural production index.<\/li>\n<\/ul>\n

            Question 5.
            \nWhat is the consumer price index number? How do you calculate it?
            \nAnswer:
            \nThe consumer price index is the index that measures the average change in retail prices. The CPI for industrial workers is increasingly considered the appropriate indicator of general inflation, which shows the most accurate impact of price rise on the cost of living of common people. The consumer price index is calculated with the help of the following formula:
            \nCPI = \\(\\frac{\\Sigma W R}{\\Sigma W}\\)<\/p>\n

            Question 6.
            \nWhat is the wholesale price index? Write its drawbacks.
            \nAnswer:
            \nThe wholesale price index number indicates the change in the general price level. In other words, it reflects the general price level for a group of items taken as a whole. In India,-it is the most popular price index used in the business industry and policy market. It acts as an indicator of the rate of inflation.<\/p>\n

            The main drawbacks are:<\/p>\n

              \n
            • It does not have any reference consumer category.<\/li>\n
            • It does not include items from services like barber charges, repairing, etc.<\/li>\n<\/ul>\n

              Question 7.
              \nWhat is the industrial production index? Which year is the base for their index in India?
              \nAnswer:
              \nThe index number of industrial production measures changes in the level of industrial production comprising many industries. It includes the production of both public and the private sectors. It is a weighted average of quantity relatives.<\/p>\n

              The industrial production index measures the quantity of production in the area of manufacturing, mining, and utilities. They measure the overall change in the total volume of industrial production.<\/p>\n

              \"1st<\/p>\n

              In India. the industrial production index is currently calculated every month with 2004-05 as the base.<\/p>\n

              Question 8.
              \nWhat does the agricultural production index indicate? How much weight is given to food in their index?
              \nAnswer:
              \nThe agricultural production index is a weighted average of quantity relatives. Its base period is triennium ending 2007-08. In 2013-14. the index number of agricultural production was 120.2.
              \nIt has increased by 22.2 percent from the year 2007-08.
              \nFoodgrains have a weight of 50.07 percent in the agricultural production index.<\/p>\n

              Question 9.
              \nWhat does SENSEX indicate? Is it a guide to investors?
              \nAnswer:
              \nSensex is the short form of the Sensitive Index of the Bombay Stock Exchange. The value of the Sensex is with reference to the period 1978-79.<\/p>\n

              Yes. Sensex is a useful guide for investors in the stock market. If the Sensex is rising, investors are optimistic about the future performance of the economy and it is an appropriate time for investment.<\/p>\n

              Question 10.
              \nName some index numbers. Where can we get these index numbers?
              \nAnswer:
              \nFollowing arc the widely used index numbers:<\/p>\n

                \n
              • Wholesale price index<\/li>\n
              • Consumer price index<\/li>\n
              • Index of industrial production<\/li>\n
              • Index of foreign trade<\/li>\n
              • Agricultural production index.<\/li>\n
              • Producer price index.<\/li>\n
              • SENSEX.<\/li>\n<\/ul>\n

                These index numbers are available in an economic survey, conducted every year by the Government of India.<\/p>\n

                VI. Answer the following questions in about twelve sentences (each question carries 4 marks)<\/span><\/p>\n

                Question 1.
                \nExplain the features of index numbers.
                \nAnswer:
                \nThe following are the characteristics or features of index numbers:
                \n(a) Index numbers are specialized averages: These are have considered as specialized averages. An average is a single figure representing a group of figures. To obtain an average. the items must be comparable Index numbers are also one type of averages that show in a single figure. the change in two or more series of different \u00ectcms that can be expressed in different units.<\/p>\n

                (b) Index numbers measure the net change in a group of related variables: As index numbers are also averages. the describe in one single numerical value i.e. increase or decrease in a group of related variables under study. The group of variables may be the prices of a set of commodities, the volume of production in different sectors, etc.<\/p>\n

                (c) Index numbers measure the effect of changes over a period of time: Index numbers are most widely used for measuring changes over a period of time. For example, we can compare agricultural production, industrial production, imports, exports, wages, etc. during two different periods.<\/p>\n

                (d) Index numbers are expressed in percentages: The changes in magnitude are expressed in tonnes of percentages which are independent of the units of measurement. This facilitates the comparison of two or more index numbers in different situations.<\/p>\n

                (e) Index numbers measure and permit comparison of the prices of certain goods: Quantity index numbers measure the changes in the physical volume of production, construction, or employment.<\/p>\n

                \"1st<\/p>\n

                Question 2.
                \nMention the difficulties in the construction of the consumer price index.
                \nAnswer:
                \nThe following are the difficulties encountered during the construction of the consumer price index:
                \n(a) Index numbers are not based on all items: As index numbers are generally based on a couple of samples, it is not possible to take into account each and every item in the construction of the index.<\/p>\n

                (b) Index numbers are not free from error: In every stage of the construction of index numbers, starting from the selection of commodities to the choice of formulae there is a chance of an error being introduced. It is also said that index numbers are also a special type of averages since the various averages like mean, median, and mode and have their relative limitations which may lead to some errors.<\/p>\n

                (c) Index numbers are meant for a particular purpose: An index number is used to measure the change for a particular purpose only.<\/p>\n

                (d) Prices used in the construction of the cost of the living index are retail prices, which vary from shop to shop, place to place, and consumer to consumer. Therefore, index numbers prepared on such prices cannot be used for different places or different classes of people.<\/p>\n

                (e) Index numbers include so many commodities of unstable quality, which can not be used at different points of time.<\/p>\n

                (f) The ratio of expenditure on different products at different points of time and by various persons are not the same and they create difficulties in the construction of cost of living index numbers.<\/p>\n

                Question 3.
                \nCalculate the weighted average of the Price Relative Index from the following data. (N-2018)
                \n\"1st
                \nAnswer:
                \n\"1st
                \nCalculation of heighted average of Price Relative Index
                \nP01<\/sub> = \\(\\frac{\\Sigma \\mathrm{W}\\left[\\frac{p_{1}}{p_{0}} \\times 100\\right]}{\\Sigma W}\\)
                \nor
                \n\\(\\frac{\\Sigma \\mathrm{WR}}{\\Sigma \\mathrm{W}}=\\frac{15600}{100}\\) = 156
                \nP01<\/sub> = 156<\/p>\n

                Question 4.
                \nWrite a note on SENSEX.
                \nAnswer:
                \nSensex is the short form for the Bombay Stock Exchange Sensitive Index with 1978-79 as a base. The value of the Sensex is with reference to this period. It is the benchmark index for the Indian stock market. It consists of 30 stocks which represent 13 sectors of the economy and the companies listed are leaders in their respective industries. If the Sensex rises, it indicates that the market is doing well and investors expect better earnings from companies. It also indicates the growing confidence of investors in the basic health of the economy.<\/p>\n

                Further, the sensitive index is a market capitalization of the weighted index of a sample of large, well-established, and financially sound companies. It is the oldest index in India and has acquired a unique place in the collective consciousness of investors. This index is widely used to measure the performance of the Indian stock market. It is the pulse of the Indian capital market.<\/p>\n

                \"1st<\/p>\n

                Question 5.
                \nCalculation of cost of living Index or Consumer Price Index is calculated as follows:
                \n\"1st
                \nAnswer:
                \n\"1st
                \nCalculation of cost of living Index or Consumer Price Index is calculated as follows:
                \nCPI = \\(\\frac{\\Sigma \\mathrm{WP}}{\\Sigma \\mathrm{W}}=\\frac{3922.5}{31}\\)
                \nCPI = 126.531
                \nComment: It means that there is an increase in prices by 26.53%.<\/p>\n

                Question 6.
                \nCalculate index numbers from the following data by the Laspeyres method.
                \n\"1st
                \nAnswer:
                \nTo calculate Laspeyres index, we need to find some of p1<\/sub>q0<\/sub> p1<\/sub>,q0<\/sub>\u00a0Laspeyre\u2019s Method<\/p>\n\n\n\n\n\n\n\n
                Commodity<\/strong><\/td>\np0<\/sub><\/strong><\/td>\nq<\/span>0<\/sub><\/strong><\/td>\np1<\/sub><\/strong><\/td>\nq<\/span>1<\/sub><\/strong><\/td>\np1<\/sub>q0<\/sub><\/strong><\/td>\np1<\/sub>q0<\/sub><\/strong><\/td>\n<\/tr>\n
                A<\/td>\n8<\/td>\n5<\/td>\n10<\/td>\n11<\/td>\n50<\/td>\n40<\/td>\n<\/tr>\n
                B<\/td>\n8.5<\/td>\n6<\/td>\n9<\/td>\n9<\/td>\n54<\/td>\n51<\/td>\n<\/tr>\n
                C<\/td>\n9<\/td>\n4<\/td>\n12<\/td>\n6<\/td>\n48<\/td>\n36<\/td>\n<\/tr>\n
                <\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/td>\n152<\/td>\n127<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                p01<\/sub> = \\(\\frac{\\Sigma p_{1} q_{0}}{\\sum p_{0} q_{0}}\\) \u00d7 100
                \n= \\(\\frac{152}{127}\\) \u00d7 100
                \np01<\/sub> = 119.68<\/p>\n

                \"1st<\/p>\n

                Question 7.
                \nCalculate Paasche\u2019s index numbers from the following data.<\/p>\n\n\n\n\n\n\n\n\n
                Item<\/strong><\/td>\nPo<\/strong><\/td>\nQ0<\/sub><\/strong><\/td>\nP1<\/sub><\/strong><\/td>\nQ1<\/sub><\/strong><\/td>\n<\/tr>\n
                A<\/td>\n6<\/td>\n50<\/td>\n10<\/td>\n56<\/td>\n<\/tr>\n
                B<\/td>\n2<\/td>\n100<\/td>\n2<\/td>\n120<\/td>\n<\/tr>\n
                C<\/td>\n4<\/td>\n60<\/td>\n6<\/td>\n60<\/td>\n<\/tr>\n
                D<\/td>\n10<\/td>\n30<\/td>\n12<\/td>\n24<\/td>\n<\/tr>\n
                E<\/td>\n8<\/td>\n40<\/td>\n12<\/td>\n36<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                Answer:
                \nTo calculate Paasche’s index, we need to find some of p1<\/sub>q1<\/sub>, and p0<\/sub>q1
                \n<\/sub><\/p>\n\n\n\n\n\n\n\n\n\n
                Item<\/strong><\/td>\nPo<\/strong><\/td>\n%<\/strong><\/td>\np1<\/sub><\/strong><\/td>\nq1<\/sub><\/strong><\/td>\np1<\/sub>q1<\/sub><\/strong><\/td>\np0<\/sub>q1<\/sub><\/strong><\/td>\n<\/tr>\n
                A<\/td>\n6<\/td>\n50<\/td>\n10<\/td>\n56<\/td>\n560<\/td>\n336<\/td>\n<\/tr>\n
                B<\/td>\n2<\/td>\n100<\/td>\n2<\/td>\n120<\/td>\n240<\/td>\n240<\/td>\n<\/tr>\n
                C<\/td>\n4<\/td>\n60<\/td>\n6<\/td>\n60<\/td>\n360<\/td>\n240<\/td>\n<\/tr>\n
                D<\/td>\n10<\/td>\n30<\/td>\n12<\/td>\n24<\/sup><\/td>\n288<\/td>\n240<\/td>\n<\/tr>\n
                E<\/td>\n8<\/td>\n40<\/td>\n12<\/td>\n36<\/td>\n432<\/td>\n288<\/td>\n<\/tr>\n
                <\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/td>\n1880<\/td>\n1344<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                p01<\/sub> = \\(\\frac{\\Sigma p_{1} q_{1}}{\\Sigma p_{0} q_{1}}\\) \u00d7 100 = \\(\\frac{1880}{1344}\\) \u00d7 100 = 1.398 \u00d7 100
                \nP01<\/sub> = 139.8<\/p>\n

                \"1st<\/p>\n

                VII. Answer the following in about twenty sentences (each question carries 6 marks)<\/span><\/p>\n

                Question 1.
                \nExplain the uses of index numbers.
                \nAnswer:
                \nIndex numbers are very useful to record changes in output, income, employment, productivity, business activities, etc. Index numbers are applied to measure variations in almost all sectors of an economy.<\/p>\n

                The uses of index numbers are as follows:
                \n(a) Useful in policymaking: Index numbers are very essential for the government. They help in studying trends of various sectors, and these trends and tendencies are the basis on which the economic policies are made. They are also useful in wage negotiation, formulation of income policy, price policy, rent control, taxation, and general economic policy formulation.<\/p>\n

                (b) Helpful in studying trends: Since index numbers are most widely used for measuring changes over a period of time, the time series so formed enable us to study the general trends of the phenomenon under study.<\/p>\n

                (c) Useful to measure the rate of inflation: The WPI is widely used to measure the rate of inflation. If inflation is very7 high, money may lose its value. Its primary impact lies in lowering the value of money. So, the study of index numbers will help us in taking appropriate measures to tackle this problem.<\/p>\n

                (d) The CPI is used in calculating the purchasing power of money and real wages.<\/p>\n

                (e) The index of industrial production gives us a quantitative figure about the changes in production in the industrial sector.<\/p>\n

                (f) Agricultural production index provides us a ready reckoner of the performance of the agricultural sector.<\/p>\n

                (g) Sensex is a useful guide for investors in the stock market. If Sensex is rising, investors are optimistic about the future performance of the economy and think it is an appropriate time investment.<\/p>\n

                Question 2.
                \nExplain the difficulties in the construction of the Consumer Price Index number.
                \nAnswer:
                \nThe following are the difficulties in the construction of the Consumer Price Index:
                \n(a) Index numbers are not based on all items: As index numbers are generally based on a sample, it is not possible to take into account each and every item in the construction of the index.<\/p>\n

                (b) Index numbers are not free from error: In every stage of the construction of index numbers, starting from the selection of commodities to the choice of formulae there is a change of an error being introduced. It is also said that index numbers are also a special type of averages, since the various averages like mean, median and mode, and have their relative limitations which may lead to some errors.<\/p>\n

                (c) Index numbers are meant for a particular purpose: An index number is used to measure the change for a particular purpose only.<\/p>\n

                \"1st<\/p>\n

                (d) Prices used in the construction of the Cost of Living Index are retail prices, which vary from shop to shop, place to place, and consumer to consumer. Therefore, index numbers prepared on such prices cannot be used for different places or different classes of people.<\/p>\n

                (e) Index numbers include so many commodities of unstable quality, which can not be used at different points in time.<\/p>\n

                (f) The ratio of expenditure on different products at different points of time and by various persons, are not the same, and they create difficulties in the construction of Cost of Living Index Numbers.<\/p>\n

                Question 3.
                \nWrite short notes on CPI, WPI, and IIP.
                \nAnswer:
                \n(a) Consumer Price Index (CPI): The Consumer Price Index measure the average change in retail prices. It is also called as cost of living index. In India, three CPI\u2019s are constructed. The} are CPI for Industrial workers, CPI for (new series), and CPI for Agricultural laborers. They are calculated every month to analyze the impact of changes in the retail prices on the cost of living of these three broad categories of consumers.<\/p>\n

                The CPI for Industrial workers and agricultural laborers is published by Labour Bureau, Shimla. The central statistical organization publishes the CPI number of Urban Non-Manual employees.<\/p>\n

                The weights, while calculating CPI, are given to major groups of goods and services. The food and beverages 45.86 %, fuel and light 6.84 %, housing 10.7 %, clothing, and footwear 6.53 %, pan, supari, tobacco, etc. 2.38 %, and miscellaneous 20.82 %.<\/p>\n

                (b) Wholesale price index (WPI): The Wholesale Price Index number indicates the change in the general price level. It does not have any reference consumer category. It does not include items pertaining to services like barber charges, repairing, etc.<\/p>\n

                The WPI also acts as an indicator of changes in the economy. In India, the first wholesale price index number was compiled in 1947. The latest wholesale price index number in India is constructed with 2004-05 as the base year.<\/p>\n

                The WPI is the only price index in India, which is available on weekly basis with the shortest time gap of two weeks. Due to this reason, it is widely used in business and industry and by the Government. It is also taken as an indicator of the inflation rate in the economy.<\/p>\n

                In India, the commodities trade on a wholesale basis are of three categories viz., primary articles, consisting of 102 items and have weights of 20.1 %, energy articles, consisting of 19 items with weightage of 14.9 %, and manufactured articles consisting of 555 items with 65 % of weightage.<\/p>\n

                (c) Index of industrial production (IIP): The Index number of Industrial Production measures changes in the level of industrial production comprising many industries. It includes the production of both public and private sectors. It is a weighted average of quantity relatives.<\/p>\n

                \"1st<\/p>\n

                The IIP is calculated with the help of following formula:
                \nIIP02<\/sub> = \\(\\frac{\\Sigma q_{1} \\times \\mathrm{W}}{\\Sigma \\mathrm{W}}\\) \u00d7 100<\/p>\n

                In India, it is currently calculated every month with 2004-05 as the base year.<\/p>\n

                While calculating Industrial Production Index, weights are given to each category of industries. Mining and quarrying is 14.2 %, manufacturing is 75.5 % and Electricity’ is given 10.3 %.<\/p>\n

                Question 4.
                \nExplain the uses of Consumer Price Index numbers.
                \nAnswer:
                \nThe consumer price index, also known as the cost of living index, measures the average change in retail prices.<\/p>\n

                The uses of consumer price index number are as follows:
                \n(a) Useful in policymaking: Index numbers are very essential for the government. They help in studying trends of various sectors, and these trends and tendencies are the basis on which the economic policies are made. They are also useful in wage negotiation, formulation of income policy, price policy, rent control, taxation, and general economic policy formulation.<\/p>\n

                (b) Helpful in studying trends: Since index numbers are most widely used for measuring changes over a period of time, the time series so formed enable us to study the general trends of the phenomenon under study.<\/p>\n

                (c) Useful to measure the rate of inflation: The WPI is widely used to measure the rate of inflation. If inflation is very high, money may lose its value. Its primary impact lies in lowering the value of money. So the study of index numbers will help us in taking appropriate measures to tackle this problem.<\/p>\n

                (d) The CPI is used in calculating the purchasing power of money and a real wage.<\/p>\n

                \"1st<\/p>\n

                Question 5.
                \nCalculate Price Index Number by:
                \n(a) Laspeyres method
                \n(b) Paasche\u2019s method.<\/p>\n\n\n\n\n\n\n\n\n
                Commodity<\/strong><\/td>\n1990<\/strong><\/td>\n1995<\/strong><\/td>\n<\/tr>\n
                Price<\/strong><\/td>\nQuantity<\/strong><\/td>\nPrice<\/strong><\/td>\nQuantity<\/strong><\/td>\n<\/tr>\n
                A<\/td>\n20<\/td>\n15<\/td>\n30<\/td>\n20<\/td>\n<\/tr>\n
                B<\/td>\n15<\/td>\n10<\/td>\n20<\/td>\n15<\/td>\n<\/tr>\n
                C<\/td>\n30<\/td>\n20<\/td>\n25<\/td>\n10<\/td>\n<\/tr>\n
                D<\/td>\n10<\/td>\n5<\/td>\n12<\/td>\n10<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                Answer:
                \n\"1st
                \nLaspeyres Method:
                \np01<\/sub> = \\(\\frac{\\Sigma p_{1} q_{0}}{\\Sigma p_{0} q_{0}}\\) \u00d7 100
                \n= \\(\\frac{1210}{1100}\\) \u00d7 100
                \n= 1.1 \u00d7 100
                \np01<\/sub> = 110<\/p>\n

                Paasche\u2019s method:
                \np01<\/sub> = \\(\\frac{\\Sigma p_{1} q_{1}}{\\sum p_{0} q_{1}}\\) \u00d7 100
                \n= \\(\\frac{1270}{1025}\\) \u00d7 100
                \n= 1.239 \u00d7 100
                \np01<\/sub> = 123.9<\/p>\n

                VIII. Project-oriented question (5 marks)<\/span><\/p>\n

                Question 1.
                \nRecord the daily expenditure, quantities bought and prices paid per unit of the daily purchases, such as rice, Joor dal, tomato, onion, and milk of your family for two weeks. How has the price change affected your family? (S-2018)(N-2018)
                \nAnswer:
                \nThe following table shows the list of items with quantities purchased by a family:<\/p>\n\n\n\n\n\n\n\n\n
                Items<\/strong><\/td>\nQuantities (W)<\/strong><\/td>\nPrice Paid (I Week) P0<\/sub><\/strong><\/td>\n\n

                Price Paid (II Week )<\/strong>
                \n P1<\/sub><\/strong><\/p>\n<\/td>\n<\/tr>\n

                Rice<\/td>\n4 kgs<\/td>\n200<\/td>\n210<\/td>\n<\/tr>\n
                Toor dal<\/td>\n1 kg<\/td>\n100<\/td>\n80<\/td>\n<\/tr>\n
                Tomato<\/td>\n2 kgs<\/td>\n120<\/td>\n180<\/td>\n<\/tr>\n
                Onion<\/td>\n1 kg<\/td>\n40<\/td>\n40<\/td>\n<\/tr>\n
                Milk<\/td>\n7 litres<\/td>\n210<\/td>\n210<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                \"1st<\/p>\n

                Now we need to calculate CPI by calculating price relative with the help of formulae.<\/p>\n\n\n\n\n\n\n\n\n\n
                Commodities<\/strong><\/td>\nQ0<\/sub> (W)<\/strong><\/td>\n(Po)<\/strong><\/td>\nPi<\/strong><\/td>\n\\(\\mathbf{R}=\\frac{p_{1}}{p_{0}} \\times \\mathbf{1 0 0}\\)<\/strong><\/td>\nRW<\/strong><\/td>\n<\/tr>\n
                Rice<\/td>\n4<\/td>\n200<\/td>\n210<\/td>\n105<\/td>\n420<\/td>\n<\/tr>\n
                Toor dal<\/td>\n1<\/td>\n100<\/td>\n80<\/td>\n80<\/td>\n80<\/td>\n<\/tr>\n
                Tomato<\/td>\n2<\/td>\n120<\/td>\n180<\/td>\n150<\/td>\n300<\/td>\n<\/tr>\n
                Onion<\/td>\n1<\/td>\n40<\/td>\n40<\/td>\n100<\/td>\n100<\/td>\n<\/tr>\n
                Milk<\/td>\n7<\/td>\n210<\/td>\n210<\/td>\n100<\/td>\n700<\/td>\n<\/tr>\n
                <\/td>\n15<\/td>\n<\/td>\n<\/td>\n<\/td>\n1600<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

                Calculation of Living Index or Consumer Price Index is calculated as follows:
                \nCPI = \\(\\frac{\\Sigma \\mathrm{WP}}{\\Sigma \\mathrm{W}}=\\frac{1600}{15}\\) = 106.66
                \nCPI = 106.66
                \nComment: It shows that there is an increase in price by 6.66%. which has a little effect on the standard of living.<\/p>\n

                1st PUC Economics Question Bank with Answers<\/a><\/h4>\n","protected":false},"excerpt":{"rendered":"

                Karnataka 1st PUC Economics Question Bank Chapter 8 Index Numbers 1st PUC Economics Index Numbers TextBook Questions and Answers I. Choose the correct answers (each question carries 1 mark) Question 1. The index number is a (a) Measure of relative changes (b) A special type of an average (c) A percentage relative (d) All the …<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[81],"tags":[],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/kseebsolutions.guru\/wp-json\/wp\/v2\/posts\/87963"}],"collection":[{"href":"https:\/\/kseebsolutions.guru\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/kseebsolutions.guru\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/kseebsolutions.guru\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/kseebsolutions.guru\/wp-json\/wp\/v2\/comments?post=87963"}],"version-history":[{"count":0,"href":"https:\/\/kseebsolutions.guru\/wp-json\/wp\/v2\/posts\/87963\/revisions"}],"wp:attachment":[{"href":"https:\/\/kseebsolutions.guru\/wp-json\/wp\/v2\/media?parent=87963"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/kseebsolutions.guru\/wp-json\/wp\/v2\/categories?post=87963"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/kseebsolutions.guru\/wp-json\/wp\/v2\/tags?post=87963"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}