If the current-period prices of every commodity rise by the same proportion while quantities remain unchanged, a suitable price index will generally:
Correct answer: A. Show the same proportional rise
- A. Show the same proportional rise
- B. Remain equal to 100
- C. Show a fall in total value
- D. Measure only the quantity change
Explanation
When every price changes by the same proportion and quantities do not change, the price index should reflect that common proportional change. It should not remain at 100 unless prices are unchanged from the base period.
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About Index Numbers
Index numbers measure relative changes in prices, quantities or values over time using a base period. Work includes simple and weighted price indices, aggregate methods, consumer price calculations, percentage change and purchasing power, with attention to choosing a base year and interpreting an index rather than treating it as an absolute amount.
Practise Index Numbers
30 free Index Numbers MCQs from Quantitative Methods, each with the correct answer and an explanation. Unlimited attempts, no account needed.
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