Scribd
Upload
765 views1 page

Calculate The Composite Index

A composite index is constructed for a group of related variables or items to measure changes over time. It is calculated using a formula that sums the product of individual item indexes and their assigned weights. For example, a cost of living index was calculated using food, clothing and miscellaneous item indexes weighted at 50%, 20% and 30%. The summed product was then divided by the total weights to get a composite index value indicating a 190% increase in prices. Various methods can be used to construct composite indexes.

Uploaded by

Liyana Farhana
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as TXT, PDF, TXT or read online on Scribd
765 views1 page

Calculate The Composite Index

A composite index is constructed for a group of related variables or items to measure changes over time. It is calculated using a formula that sums the product of individual item indexes and their assigned weights. For example, a cost of living index was calculated using food, clothing and miscellaneous item indexes weighted at 50%, 20% and 30%. The summed product was then divided by the total weights to get a composite index value indicating a 190% increase in prices. Various methods can be used to construct composite indexes.

Uploaded by

Liyana Farhana
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as TXT, PDF, TXT or read online on Scribd
You are on page 1/ 1

Index constructed for a group of variables is called as composite index.

Index constructed for a group of related items such as Steel, Bricks, Cement, S and, Wood etc related to construction activity is termed as composite index. Wholesale price index, index of crime rate, index of cost of education are a fe w examples. Index number constructed taking the weights and index numbers of a group of rel ated items is called as Composite index number. Cost of living index numbers are constructed considering the index numbers of food, clothing, rent, fuel, lighti ng etc. and their weights. It can be calculated by using the following formula. Composite index number/Cost of living index number = sigma(IW)/sigma W I denotes the price index numbers of related items W denotes the weights assigned For ex. Group Index(I) Weight(W) IW Food --- 250 -------- 50%-----12500 Clothing 300 ------- 20%----- 6000 Miscella neous --- 350--------30%-----10500 SigmaW = Total of weights = 100 sigmaIW = 29000 Cost of living index number = 29000/100 = 290 This indicates that there is 290 - 100 = 190% increase in the prices of related items consumed by the specific group of consumers in the current year. A number of formulae or methods are used for the construction of composite index Index constructed for a group of variables is called as composite index. Index constructed for a group of related items such as Steel, Bricks, Cement, S and, Wood etc related to construction activity is termed as composite index. Wholesale price index, index of crime rate, index of cost of education are a fe w examples. Index number constructed taking the weights and index numbers of a group of rel ated items is called as Composite index number. Cost of living index numbers are constructed considering the index numbers of food, clothing, rent, fuel, lighti ng etc. and their weights. It can be calculated by using the following formula. Composite index number/Cost of living index number = sigma(IW)/sigma W I denotes the price index numbers of related items W denotes the weights assigned For ex. Group Index(I) Weight(W) IW Food --- 250 -------- 50%-----12500 Clothing 300 ------- 20%----- 6000 Miscella neous --- 350--------30%-----10500 SigmaW = Total of weights = 100 sigmaIW = 29000 Cost of living index number = 29000/100 = 290 This indicates that there is 290 - 100 = 190% increase in the prices of related items consumed by the specific group of consumers in the current year. A number of formulae or methods are used for the construction of composite index

You might also like