Chapter 6. INDEX NUMBERS Q.4. Distinguish between: 1. Simple Index Numbers and Weighted Index Numbers

Balbharati solutions for Economics HSC 12th Standard Maharashtra State Board 

Chapter 6. INDEX NUMBERS

Q.4. Distinguish between:

1. Simple Index Numbers and Weighted Index Numbers

Simple Index Numbers	Weighted Index Numbers
In this method, every commodity is given equal importance. It is the easiest method for constructing index numbers.	In this method, suitable weights are assigned to various commodities. It gives relative importance to the commodity in the group. In most of the cases ‘quantities’ are used as weights.
This method can be applied to determine the Price Index Number, Quantity Index Number, and Value Index Number.	There are various methods of constructing weighted index numbers such as Laaspeyre’s Price Index, Paasche’s Price Index, etc.