Characteristics and Uses
Index Numbers — Chapter 2, GSEB Class 12 Statistics
Characteristics of Index Numbers
Index numbers have five key characteristics that make them unique statistical tools:
Key insight: Index numbers are always ≥ 0. The base year = 100. If the index is 115, it means a 15% increase from the base year.
Uses of Index Numbers
Index numbers are widely used across government, business, and labour sectors:
WPI vs CPI: WPI (Wholesale Price Index) tracks wholesale prices; CPI (Consumer Price Index) tracks retail prices. CPI is used for DA and cost-of-living adjustments.
Key Takeaways
Key Takeaways
- Index numbers measure relative change, not absolute values — they are always expressed as a ratio or percentage.
- The base year index is always set at 100; all other years are compared to it.
- Five key characteristics: relative measure, percentage expression, comparative tool, has a base, can be simple or weighted.
- Government uses index numbers for policy formulation, DA calculation, and wage fixation.
- WPI measures wholesale price changes; CPI measures retail price changes — CPI is used for cost-of-living adjustments.
- Businesses use index numbers for planning, pricing, and forecasting demand.