INDEX NUMBER

INDEX NUMBE

R

PRICE

INDEX

COMPOSITE

INDEX

PRICE INDEXIndicates changes in the general price level from the base year to

the current year.

0

1

Where,I = Index priceP1 = Price at base timeP0 = Price at specific time

EXAMPLES

a) Price of the house Sulaiman bought in year 2004 was RM110 000. In the year 2006, price of the house went up to RM130 000. Calculate the price index of the house for the year 2006 based on the year 2004.

b) The price of a bottle of cooking oil in the year 2009 was RM15. Given that the price index for the year 2010 based on the year 2009 is 105. Calculate the price of the cooking oil in the year 2010.

c) Based on the year 2003, index number of an oven for the years 2006 and 2009 are 110 and 130 respectively. Find the index number for the year 2009 based on the year 2006.

*give students exercise for extra understanding

COMPOSITE INDEX

Indicates multi-item instruments for measuring single concept with

several attributes.

WEIGHTAGE ; Value given to each item to show relative importance.

EXAMPLE 1Product Price Index Weightage

P 110 2

Q 130 4

R 105 3

S 120 1

Table above shows price indices of few types of products made by factory for year 2008 based on year 2005. Calculate the composite index for year 2008 based on year 2005.

EXAMPLE 2Clothes Price Index Weightage

Blouse 110 5

Pants 120 n

Jacket 130 4

Gown 150 3

Table shows the price indices of a few types of clothes sold at the shop for the year 2009 based on the year 2003. If the composite index for the year 2009 based on the year 2003 is 124, find the value of n.

EXAMPLE 3Food items

Price Weightage

2005 2010 P 1.00 1.20 4 Q 2.40 3.00 3 R 5.40 6.75 7 S 8.50 11.90 6

The above table shows the prices of four food items in year 2005 and 2010. Calculate the composite index for the year 2010 based on the year 2005.

EXAMPLE 4Model of washing

machinePrice Index Weightage

Toshiba 110 6

Panasonic 100 k

Samsung 130 4

Singer 150 2

Table shows price indices & weightage of 4 model of washing machine for the year 2008 based on year 2006. Composite index for the year 2008 based on 2006 is 114.

a) Calculate value of k

b) If the price of Singer washing machine in year 2006 was RM800, calculate price in year 2008

c) Price index of Toshiba washing machine increased by 5% from year 2008 to 2010, price index of Singer decreased by 5% while price indices of the other models were unchanged. Calculate the composite index for year 2010 based on year 2006.

EXAMPLE 5Items Price Change Weightage

K Increased by 10% 4

L 1

M Increased by 20% 4

N Unchanged 1

Table shows price changes of expenses of a few items of Encik Nasaruddin’s family from year 2002 to year 2004. If the composite index for year 2004 based on 2002 is 111.5, calculate the percentage of the expenses for item L.