An index number is primarily used to?

An index number is primarily used to?

• A. A standardised measure of changes in price/output over different periods and comparing them to a base number
• B. The sum of prices across periods
• C. The absolute price level in the current period
• D. A measure of unchanging quantities

Answer: (A)

Index numbers are used to show how a variable such as price or output changes over time in a standardized way, by relating each period to a base period. By setting the base period to a fixed point (often 100) and expressing other periods as a percentage of that base, you can easily see whether prices or output have risen or fallen and by how much relative to that base. This makes it possible to compare movements across different periods even when absolute values differ. So, the idea that fits best is a standardized measure of changes in price or output over different periods and comparing them to a base number. It’s not about simply summing prices across periods, not about the current absolute price level, and not about measuring unchanged quantities.

Index numbers are used to show how a variable such as price or output changes over time in a standardized way, by relating each period to a base period. By setting the base period to a fixed point (often 100) and expressing other periods as a percentage of that base, you can easily see whether prices or output have risen or fallen and by how much relative to that base. This makes it possible to compare movements across different periods even when absolute values differ.

So, the idea that fits best is a standardized measure of changes in price or output over different periods and comparing them to a base number. It’s not about simply summing prices across periods, not about the current absolute price level, and not about measuring unchanged quantities.