Index Numbers Class 11 Notes: CBSE 11th Economics Chapter 7, Download PDF

Index Numbers Class 11 Revision Notes: This article brings to you Revision Notes for Class 11 Economics Chapter 7, Index Numbers. Also, find attached a PDF download link for the same. Students can download the PDF to save it for future reference. These will come in handy for students appearing for CBSE Class 11 annual examinations in 2024.

 CBSE’s updated Syllabus 2024 has been considered while making these revision notes. They don’t consist of topics that have been deleted as per this syllabus. It is important to refer to the latest syllabus before you start preparing for your examinations since the updated syllabus tells you which topics have to be avoided, what has been added, which topic is more important for the current session, etc. For your reference, we have attached the updated CBSE Syllabus here.

Related:

CBSE Class 11 Economics Syllabus 2023-2024(PDF)

CBSE Class 11 Economics Deleted Syllabus 2023-2024(PDF)

Revision Notes for CBSE Class 11 Economics Chapter 1 2023-2024(PDF)

Revision Notes for CBSE Class 11 Economics Chapter 2 2023-2024(PDF)

Revision Notes for CBSE Class 11 Economics Chapter 3 2023-2024(PDF)

Revision Notes for CBSE Class 11 Economics Chapter 4 2023-2024(PDF)

Revision Notes for CBSE Class 11 Economics Chapter 5 2023-2024(PDF)

Revision Notes for CBSE Class 11 Economics Chapter 6 2023-2024(PDF)

Revision Notes for Class 11 Economics Chapter 7 are presented below:

What is an Index Number?

An index number is a statistical device for measuring changes in the magnitude of a group of related variables. It represents the general trend of diverging ratios, from which it is calculated. It is a measure of the average change in a group of related variables over two different situations. The comparison may be between like categories such as persons, schools, hospitals, etc. It also measures changes in the value of the variables.

Base Period- Of the two periods, the period with which the comparison is to be made, is known as the base period. The value in the base period is given the index number 100.

Construction of Index Number

There are two ways of constructing an index number. They are:

• The Aggregative Method- The formula for a simple aggregative price index isP₀₁= ΣP₁/ΣP₀ x 100, where P1 and P0 indicate the price of the commodity in the current period and base period respectively. The formula for a weighted aggregative price index is P₀₁= ΣP₁ Q₀/ΣP₀Q₀ X 100
• Averaging relatives- The method of averaging relatives takes the average of these relatives when there are many commodities. The price index number using price relatives is defined as P₀₁= 1/n x Σ P₁/P₀ x 100, where P1 and Po indicate the price of the ith commodity in the current period and base period respectively. The ratio (P1 /P0 ) × 100 is also referred to as the price relative of the commodity. n stands for the number of commodities. The weighted index of price relatives is the weighted arithmetic mean of price relatives defined as P₀₁= Σ^N_i=1 W_i(P_1i/P_0i) x 100/ Σ^N_i=1 W_i, where W = Weight

Some Important Index Numbers

1. Consumer Price Index- The consumer price index (CPI), also known as the cost of living index, measures the average change in retail prices.

Consumer Price Index Number- Government agencies in India prepare a large number of consumer price index numbers.Examples: Consumer Price Index Numbers for Industrial Workers with base 2001=100. The value of Index in May 2017 was 278. All-India Consumer Price Index Numbers for Agricultural Labourers with base 1986- 87=100. The value of Index in May 2017 was 872.

2. Wholesale Price Index- The Wholesale price index number indicates the change in the general price level. Unlike the CPI, it does not have any reference consumer category.

3. Index of industrial production- This is an index that tries to measure quantities. manufactured. While the price indices were essentially weighted averages of price relatives, the index of industrial production is a weighted arithmetic mean of quantity relatives with weights being allotted to various items in proportion to value added by manufacture in the base year by using Laspeyre’s formula: IIP₀₁= (Σ^N_i=1 Q_1i W_i)/Σ^N_i=1 W_i, where IIP01 is the index, qi1 is the quantity relative for year 1 with year 0 as a base for good I, Wi is the weight allotted to the good i. There are n goods in the production index.

4. Human Development Index- The Human Development Index (HDI) measures average achievement in key dimensions of human development: a long and healthy life, being knowledgeable and having a decent standard of living.

Sensex- Sensex is the short form of Bombay Stock Exchange Sensitive Index with 1978–79 as its base. 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.

Issues in the construction of an index number

• You need to be clear about the purpose of the index. Calculation of a volume index will be inappropriate when one needs a value index.
• The items to be included in any index have to be selected carefully to be as representative as possible.
• Every index should have a base year.
• Another issue is the choice of the formula, which depends on the nature of the question to be studied.
• Besides, there are many sources of data with different degrees of reliability. Data of poor reliability will give misleading results. Hence, due care should be taken in the collection of data.

Index Number in Economics

• Consumer index number (CPI) or cost of living index numbers are helpful in wage negotiation, formulation of income policy, price policy, rent control, taxation, and general economic policy formulation.
• The wholesale price index (WPI) is used to eliminate the effect of changes in prices on aggregates, such as national income, capital formation, etc.
• The WPI is widely used to measure the rate of inflation. Inflation is a general and continuing increase in prices. If inflation becomes sufficiently large, money may lose its traditional function as a medium of exchange and as a unit of account.
• CPI is used in calculating the purchasing power of money and real wage.
• Index of industrial production gives us a quantitative figure about the change in production in the industrial sector.
• Agricultural production index provides us with a ready reckoner of the performance of the agricultural sector.
• 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. It is an appropriate time for investment.

Where to find these index numbers?

Some of the widely used index numbers — WPI, CPI, Index Number of Yield of Principal Crops, Index of Industrial Production, Index of Foreign Trade — are available in Economic Survey.

To download the revision notes for Class 11 Economics Chapter 7, click on the link below

This chapter is comparatively short and easier to grasp. These notes shall be enough for your preparation for the annual examinations.

Also find:

CBSE Class 11 Syllabus 2023-24 (All Subjects)

CBSE Class 11 Deleted Syllabus 2023-24 (All Subjects)

NCERT Class 11 Rationalised Content 2023-2024 (All Subjects)