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Index Numbers

Economics, Economic / Financial Data

Indexes (also known as indices) are used for comparing different sets of data (usually economic or financial), especially over time.  They are often constructed by taking a weighted average of different series of data.  Indices are used to partially summarise unwieldy data.
Examples of indices:

Base Period

Indices usually have a base period, to assist in making comparisons across time.  The index at the base period is usually scaled to 100 or 1000.  For example, let’s say that the index at the chosen base period is set to 1000.  If at another period the index is 2000, then the value indicated by the index (e.g. prices) would be estimated to be double what it was during the base period. 
The base period of an index can be changed by dividing each period’s value by the desired base period value, and then multiplying by its base scale e.g. 100 or 1000.  For example, to change the base period of the following index from 1985 to 1990, each value is divided by 1178 and then multiplied by 1000.

Year Old Index New Index
1985 1000 849
1990 1178 1000
1995 1540 1307
2000 1517 1288

See also:

Different ways of measuring the Consumer Price Index (CPI)
Elementary Indices
Axiomatic Analysis of Elementary Indices


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