Index Number in Statistics Notes
INDEX NUMBER expresses the relative change in price, quantity, or value compared to a base period. An index number is used to measure changes in prices paid for raw materials; numbers of employees and customers, annual income and profits, etc.
If the index number is used to measure the relative change in just one variable, such as hourly wages in manufacturing, it is referred to as a simple index. An index number can also be used to measure changes in the value of the group of variables such as prices of a specified list of commodities, the volume of production in different
sectors of industry, production of various agricultural crops, cost of living, etc, it is referred to as a composite index. Index number measures the average change in a group of related variables over two different situations such as prices of a specified list of commodities, the volume of production in different sectors of industry, production of various agricultural crops, cost of living, etc. Index number does not indicate that the change is uniform for all commodities or groups of related variables used to calculate it. It may be noted that in the case of, say, Price Index, the price of some of the items may be rising, while it is falling in other items. Price index will only indicate the average change in the price of group of related commodities.
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