{"id":120742,"date":"2022-05-12T11:27:11","date_gmt":"2022-05-12T05:57:11","guid":{"rendered":"https:\/\/www.mapsofindia.com\/my-india\/?p=120742"},"modified":"2022-05-12T11:27:11","modified_gmt":"2022-05-12T05:57:11","slug":"chapter-8-index-numbers-questions-and-answers-ncert-solutions-for-class-11-economicsstatistics-for-economics","status":"publish","type":"post","link":"https:\/\/www.mapsofindia.com\/my-india\/education\/chapter-8-index-numbers-questions-and-answers-ncert-solutions-for-class-11-economicsstatistics-for-economics","title":{"rendered":"Chapter 8 – Index Numbers Questions and Answers: NCERT Solutions for Class 11 Economics(Statistics for Economics)"},"content":{"rendered":"

Question 1.
\nAn index number which accounts for the relative importance of the items is known as
\n(i) weighted index
\n(ii) simple aggregative index
\n(iii) simple average of relatives<\/h2>\n

Answer:
\n(i) An index number becomes a weighted index when the relative importance of items is taken care of weighted index is the weighted average of different goods.<\/h3>\n

Question 2.
\nIn most of the weighted index numbers the weight pertains to
\n(i) base year
\n(ii) current year
\n(iii) both base and current year<\/h2>\n

Answer:
\n(i) In general, the base period weight is preferred in calculating the weighted index number but as per Laspeyre\u2019s method it uses the base year quantity as weight, Paache uses current year quantities as weight and Fisher\u2019s Index Method uses both base and current year quantities.<\/h3>\n

Question 3.
\nThe impact of change in the price of a commodity with little weight in the index will be
\n(i) small
\n(ii) large
\n(iii) uncertain<\/h2>\n

Answer:
\n(i) An equal rise in the price of an item with little weight will have lower implications for the overall change in the price ;ndex than that of an Item with more weight.<\/h3>\n

Question 4.
\nA consumer price index measures changes in
\n(i) retail prices
\n(ii) wholesale prices
\n(iii) producers\u2019prices<\/h2>\n

Answer:
\n(i) Consumer Price Index (CPI), also known as the cost of living index, measures the average change in retail prices which show the most accurate impact of price rise on the cost of living of common people.<\/h3>\n

Question 5.
\nThe item having the highest weight in consumer price index for industrial workers is
\n(i) food
\n(ii) housing
\n(iii) clothing<\/h2>\n

Answer:
\n(i) As weight and Fisher\u2019s index method uses both base and current year quantities.
\nFood is given around 57% weight in CPI for industrial workers as it constitutes the major proportion of their total consumption.<\/h3>\n

Question 6.
\nIn general, inflation is calculated by using
\n(i) wholesale price index
\n(ii) consumer price index
\n(iii) producer\u2019s price index<\/h2>\n

Answer:
\n(i) The WPI is widely used to measure the rate of inflation. The weekly inflation rate is given by
\nXtXt1Xt\u22121\u00d7100
\nwhere X, and Xt-1to the WPI for the (t)th and (t- 1)th weeks.<\/h3>\n

Question 7.
\nWhy do we need an index number?<\/h2>\n

Answer:
\nIndex number enables us to calculate a single measure of change of a large number of items. The index numbers are needed for the general and specific purpose they are
\nMeasurement of Change in the Price Level or the Value of \u2018 Money Index number measures the value of money during different periods of time as well as we can use it to know the Impact of the change in the value of money on different sections of society. It can be worked out to correct the inflationary and deflationary gaps in the system.
\nInformation of Foreign Trade Index of export and import provides useful information regarding foreign trade which helps in formulating the policies of export and import.
\nCalculating Real Wages CPI are used in calculating the purchasing power of money and real wage as follows
\nPurchasing power of money = 1\/Cost of living index
\nReal wage = (Money wage\/Cost of living index) \u00d7 100
\nMeasuring and Comparing Output Index of Industrial Production (IIP) gives us a quantitative figure about the change in production in the industrial sector and thus helps in comparing industrial output in different periods. Similarly, agricultural production index provides us an estimate of the production index provides us an estimate of the production in agricultural sector.
\nPolicy Making of Government With the help of index numbers government determines the minatory and fiscal prey and take nassery steps to develop the country.
\nIndicating Stock Prices Sensex and NIFT are index numbers of share prices on BSE and NSE respectively. They serve as a useful guide for investors in the stock market. If the sensex and nifty are rising, investors have positive expectations about the future performance of the economy and it is an appropriate time for investment.<\/h3>\n

Question 8.
\nWhat are the desirable properties of the base period?<\/h2>\n

Answer:
\nBase period should have the following properties
\nThe base year should be a normal period and periods in which extraordinary events have occurred should not be taken as base periods as they are not appropriate for general comparisons.
\nExtreme values should not be selected as base period.
\nThe period should not be too far in the past as comparison with current period cannot be done with such base year as policies, economic and social conditions change with time.
\nBase period should be updated periodically.<\/h3>\n

Question 9.
\nWhy is it essential to have different CPI for different categories of consumers?<\/h2>\n

Answer:
\nThe Consumer Price Index (CPI) in India is calculated for different categories as under
\nCPI for industrial workers.
\nCPI for urban non-manual employees.
\nCPI for agricultural labourers.
\nThe reason behind calculation of three different CPIs is that the consumption pattern of the three groups (i.e., industrial workers, urban non-manual workers and agricultural labourers) differs significantly from each other. Therefore, to assess the impact of the price change on the cost of living of the three groups, component items included in the index need to be given different weights for each of the group. This necessitates the calculation of different CPI for different categories of consumers.<\/h3>\n

Question 10.
\nWhat does a consumer price index for industrial workers measure?<\/h2>\n

Answer:
\nConsumer price index for industrial workers measures the average change in retail prices of a basket of commodities which an industrial worker generally consumes. Consumer price index for industrial workers is increasingly being considered the appropriate indicator of general inflation, which shows the most accurate impact of price rise on the cost of living of common people.
\nThe items included in CPI (Consumer Price Index) for industrial workers are food, pan, supari, tobacco, fuel and lighting, housing, colthing, and miscellaneous expenses with food being accorded the highest weight. This implies that the food price changes have a significant impact on the CPI.<\/h3>\n

Question 11.
\nWhat is the difference between a price index and a quantity index?<\/h2>\n

Answer:
\nThe difference between a price index and a quantity index is as follows
\nPrice index numbers measure and allow for comparison of the prices of certain goods while quantity index number measure the changes in the physical volume of production, construction or employment.
\nPrice index numbers are more widely used as compared to quantity index numbers.
\nPrice index is known as unweighted index number while quantity index number is known was weighted index numbers.<\/h3>\n

Question 12.
\nIs the change in any price reflected in a price index number?<\/h2>\n

Answer:
\nNo, the change in any price is not reflected in a price index number. Price index numbers measure and permit comparison of the prices of certain goods included in the basket being used to compare prices in the base period with prices in the current period. Moreover, an equal rise in the price of an item with large weight and that of an item with low weight will have different implications for the overall change in the price index.<\/h3>\n

Question 13.
\nCan the CPI number for urban non-manual emplyees represent the changes in the cost of living of the President of India?<\/h2>\n

Answer:
\nThe CPI for the urban non-manual employees cannot represent the changes in the cost of living of the President of India. This is because the consumption basket of an average non-manual employee does not consist of the items that would be a part of the consumption basket of the President of India.<\/h3>\n

Question 14.
\nThe monthly per capita expenditure incurred by workers for an industrial centre during 1980 and 2005 on the following items are given below. The weights of these items are 75, 10, 5, 6 and 4 respectively.
\nPrepare a weghted index number for cost of living for 2005 with 1980 as the base.<\/h2>\n

\"\"<\/p>\n

Answer:<\/h3>\n

\"\"<\/p>\n

Question 15.
\nRead the following table carefully and give your comments.<\/h2>\n

Answer:
\nIndex of Industrial Production Base 1993-94<\/h3>\n

\"\"<\/p>\n

The following conclusions can be made by analysing the above table
\nManufacturing industry has the highest weight of 79.58% in Index of Industrial Production (IIP) while mining and quarrying and electricity industries account for 10.73% and 10.69% respectively.
\nManufacturing Industry has registered the highest growth among all industrial sectors in both the years 1996-97 and 2003-04.
\nMining and quarrying has registered the lowest growth rate in both the years.
\nThe General Index shows that industrial increased by 30.8% in 1996.-97 as compared to 1993-94 and by 89% in 2003-04.<\/h3>\n

Question 16.
\nTry to list the important items of consumption in your family.<\/h2>\n

Answer:
\n(This is a general example. You can use the actual consumption items in your family).
\nThe following items constitute the total consumption needs for a family
\nFood
\nClothing
\nHouse-Rent\/EMI of Housing loan
\nEducation
\nElectricity
\nEntertainment and recreation
\nMiscellaneous expenses<\/h3>\n

Question 17.
\nIf the salary of a person in the base year is ? 4,000 per annum and the current year salary is ? 6,000 by how much should his salary rise to maintanin the same standard of living if the CPI is 400?<\/h2>\n

Answer:
\nBase CPI = \u20b9 100
\nCurrent CPI = \u20b9400
\nBase Year Salary = \u20b9 4,000
\nCurrent Year Salary = \u20b9 6,000
\nWhen Base CPI is \u20b9100, then the salary is = \u20b9 4,000
\nCurrent salary equivalent to base year salary = (Base year salary\/100) \u00d7 CPI of current year
\nWhen Current CPI is \u20b9 400, then the salary should be
\n=4,000100\u00d7400= \u20b9 16,000 100
\nThus, his salary should be X 16,000 to maintain his purchasing power. Therefore, in the current year his salary should increase by \u20b9 16,000 \u2013 \u20b9 6,000 = \u20b9 10,000 so as to maintain the same level of living in the current year as that of the base year.<\/h3>\n

Question 18.
\nThe consumer price index for June, 2005 was 125. The food index was 120 and that of other items
\nWhat is the percentage of the total weight given to food?<\/h2>\n

Answer:<\/h3>\n

\"\"<\/p>\n

Let the total weight = 100
\nW1denotes weight of food
\nW2denotes weight of other items
\nSo,<\/h3>\n

\"\"<\/p>\n

Multiplying both sides of Eq. (i) by 135 and subtracting Eq. (ii) from (i) we get<\/h3>\n

\"\"<\/p>\n

So, W1=100015= 66.67
\nSubstituting the value of in the Eq. (i), we get
\nW1+ W2= 100
\nor 6667 + W2= 100
\nW2= 33.33
\nTherefore, percentage of total weight given to food is 66.67% and other items 33.33%.<\/h3>\n

Question 19.
\nAn enquiry into the budgets of the middle class families in a certain city gave the following information<\/h2>\n

\"\"<\/p>\n

What is the cost of living index of 2004 as compared with 1995?<\/h2>\n

Answer:<\/h3>\n

\"\"<\/p>\n

Cost of Living Index = 134.50
\nThus, the price rose by 34.50% during 1995 and 2004.<\/h3>\n

Question 20.
\nRecord the daily expenditure quantities bought and prices paid per unit of the daily purchases of your family for two weeks. How has the price change affected your family?<\/h2>\n

Answer:
\nThis is a practical exercise. Record the daily expenditure, quantities bought and prices paid per unit of the daily purchases of your family for two weeks and try to analyse if quantities purchased decrease with rise in price of the respective items and also note if the percentage change in quantity brought about by a percentage change in price differ for different types of items.<\/h3>\n

Question 21.
\nGiven the following data<\/h2>\n

\"\"<\/p>\n

Source Economic Survey, Government of India 2004-2005
\n(i) Calculate the inflation rates using different index numbers.
\n(ii) Comment on the relative values of the index numbers.
\n(iii) Are they comparable?<\/h2>\n

Answer:
\n(i) (a) Inflation using CPI of Industrial Workers<\/h3>\n

\"\"<\/p>\n

\"\"<\/p>\n

(b) Inflation using CPI of Non-maunal Employees<\/h3>\n

\"\"<\/p>\n

(c) Inflation using CPI of Agricultural Labourers<\/h3>\n

\"\"<\/p>\n

\"\"<\/p>\n

(d) Inflation using WPI<\/h3>\n

\"\"<\/p>\n

(ii) The inflation rate calculated using CPI industrial worker with the base year 1982 is the highest and inflation rate calculated using WPI with the base year 1993-94 is the least.
\n(iii) No the index number are not comparable because of the following reasons
\nBase periods for CPI of industrial workers, urban non-manual workers, agricultural labourers and WPI are different.
\nCommodities and their weightage in different index number may be different.<\/h3>\n","protected":false},"excerpt":{"rendered":"

Class 11 Economics(Statistics for Economics) NCERT book solutions for Chapter 8 – Index Numbers Questions and Answers<\/p>\n","protected":false},"author":21830,"featured_media":120733,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":{"0":"post-120742","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-education"},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/posts\/120742","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/users\/21830"}],"replies":[{"embeddable":true,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/comments?post=120742"}],"version-history":[{"count":1,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/posts\/120742\/revisions"}],"predecessor-version":[{"id":120759,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/posts\/120742\/revisions\/120759"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/media\/120733"}],"wp:attachment":[{"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/media?parent=120742"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/categories?post=120742"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/tags?post=120742"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}