Advantages or Uses of Index Numbers
Advantages or Uses of Index Numbers
(1) Measurement of Change in the Price Level or the Value of Money:
Most important use of index numbers is that index numbers measure the value of
money during different periods of time. We can use index numbers to know the
impact of the change in the value of money on different sections of the
society. Accordingly, devices or means can be worked out to correct
inflationary or deflationary gaps in the system.
(2) Knowledge
of the Change in Standard of Living: Index numbers help to ascertain the
living standards of people. Money incomes may increase but if index numbers
show a decrease in the value of money, living standards may even decline. Thus,
index numbers indicate change in real income.
|
Standard of living is
the level of income, comforts and services available, generally applied to a
society or location, rather than to an individual. Standard of living is
relevant because it is considered to contribute to an individual's quality of
life. a measure of how
comfortable the life of a particular person or group is जीवन-स्तर (किसी व्यक्ति या समूह के जीवन के सुख-सुविधा संपन्न होने की मात्रा) |
(3) Adjustments
in Salaries and Allowances: Cost of living index is a useful guide to the
Government and Private Enterprises to make necessary adjustments in salaries
and allowances of the workers. Increase in the cost of living index suggests
increase in salaries and allowances.
(4) Useful
to Business Community: Price index numbers serve as a useful guide to the
business community in their planning and decisions. Trend of the prices
significantly influence their production decisions
(5) Information Regarding Production: Index numbers of production shows
whether the level of agricultural and industrial production in the economy is
increasing or decreasing. Accordingly, agricultural and industrial development
policies are formulated.
(6) Information
Regarding Foreign Trade: Index of exports and imports provides useful
information regarding foreign trade Accordingly, export-import policies are
formulated.
(7) Useful to Politicians: Politicians come to know of the real
economic condition in the country on the basis of index numbers. They offer
constructive criticism of government's economic policies and give suggestions
for economic reforms in the country.
(8) Useful to Government: It is with the help of index numbers that the
government determines its monetary and fiscal policies and takes concrete steps
for the economic development of the country. In other words, with the help of
index numbers, government formulates appropriate policies to increase
investment, output, income, employment, trade, price level, consumption, etc.
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Advantages or Uses of Index Numbers | Index Numbers | 11th Commerce | by @statomics11comm
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