Page 235 - DECO504_STATISTICAL_METHODS_IN_ECONOMICS_ENGLISH

Unit 17: Methods: Simple (Unweighted) Aggregate Method
Pavitar Parkash Singh, Lovely Professional University

Unit 17: Methods: Simple (Unweighted) Aggregate Method Notes

CONTENTS
Objectives
Introduction
17.1 Simple Aggregate Method
17.2 Summary
17.3 Key-Words
17.4 Review Questions
17.5 Further Readings

Objectives

After reading this unit students will be able to:
• Explain Simple Aggregate Method.
Introduction

Simple Index Number is that Index number is which all the items are assigned equal importance.
In other words, weights are not assigned to the different commodities and as such it is also called
unweighted Index Number.
There are two methods of calculating Simple Index Number.
• Simple aggregate method.
• Simple average of price relative method.
17.1 Simple Aggregate Method

This is the simplest method of constructing Index Number. In this method the total of current year
prices for the various commodities is divided by the total of base year prices, the resultant so obtained
is multiplied by 100 to get the Index Numbers for the current year in terms of percentage.
Simbolically,

∑ P
P = 1 × 100
∑ P 0
01
Where, P = Current year pric Index Number based upon base year,
01
∑P = Sum total of current year prices; ∑P = Sum total of base year prices.
1 0
In Index Number 0 is used for base year and 1 is used for current year.
Example 1: Given the following data, and assuming 1991 as the base year, find out index value of the
prices of different commodities for the year 1995.

Commodity A B C D E

Prices in 1991 (Rs.) 50 40 10 5 2

Prices in 1995 (Rs.) 80 60 20 10 6

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