Limitations of Index Numbers, The Principal Limitations of Index Numbers
🚩Timestamps:-
00:20 Limitations of Index Numbers
04:58 The Principal Limitations of Index Numbers
09:30 Concluding Remarks
Limitations of Index Numbers
(1) Not
Completely True: Index numbers are not fully true. For example, one can
only make an estimate of change in the value of money with the help of index
numbers. The index numbers simply indicate arithmetical tendency of the
temporal changes in the variable.
(2) International Comparison is not Possible: Different countries have
different basis of index numbers. These do not help international comparisons.
(3) Difference of Time: With the passage of time, it is difficult to
make comparisons of index numbers. With the changing times, man's habits,
tastes, etc., also undergo a change. Consequently, index numbers constructed on
the basis of old consumption pattern cannot be compared with the index numbers
constructed on the basis of new consumption pattern.
(4) Limited
Use: Index numbers are prepared with certain specific objective. If they
are used for another purpose they may lead to wrong conclusions. For example,
index numbers prepared to know about the economic condition of the teachers
cannot be used to know about the economic condition of the labourers.
(5) Lack of Retail Price Index Numbers: Most of the index numbers are
prepared on the basis of wholesale prices. But in real life, retail prices are
most relevant, but it is difficult to collect retail prices. Index numbers
based on wholesale prices may be misleading.
The Principal Limitations of Index Numbers
(i) there are no scientific techniques of
according weightage to different items included in the index numbers.
(ii) weightage to
different items often has a blend of personal bias.
·
bias, a strong
feeling of favour towards or against one group of people, or on one side in an
argument, often not based on fair judgement or facts - प्रायः किसी समूह के पक्ष अथवा विपक्ष में सहानुभूति, अथवा वाद-विवाद में किसी एक पक्ष के प्रति झुकाव जो तथ्यों पर आधारित नहीं; प्रायः एकतरफ़ा, पूर्वाग्रह, विशेष झुकाव, पक्षपात
(iii) owing to difference
in the unit of currency as well as difference in the composition of production
(and consumption) across different countries of the world, it is often very
difficult to construct Index Numbers that facilitate international comparisons.
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Limitations of Index Numbers, The Principal Limitations of Index Numbers | Index Numbers | 11th Commerce | by @statomics11comm
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