Index Numbers

10.1

Index Numbers

Formula

The formula for index number is:

\(I=\dfrac{Q_1}{Q_0} \times 100\)

where,

\(Q_0=\) quantity at the base time,
\(Q_1=\) quantity at a specific time.

Example

Question

A school canteen made a profit of RM \(50\,000\) in the year \(2017\) and RM \(78 \,000\) in the year \(2019\).

Calculate the index number to show the change in profit for the school canteen in the year \(2019\) based on the year \(2017\).

Solution

Based on the question,

\(Q_0=\) Profit in year \(2017\),
\(Q_1=\) Profit in year \(2019\).

Index Number:

\(\begin{aligned} I&=\dfrac{Q_1}{Q_0} \times 100 \\\\&=\dfrac{78 \,000}{50 \,000} \times 100 \\\\ &=156. \end{aligned}\)