Definition:Index Number
This page is about index number in the context of statistics. For other uses, see index.
Definition
An index number in the context of statistics and economics is a measure of a change in some business activity over time.
It is constructed based on reliable information on relevant components, usually weighted according to importance.
An index number is usually defined relative to a specific base year, at which time the value of the index number would be assigned a round number, usually $100$ but sometimes $1000$.
Base Year
The base year of an index number is the year from which the index number is first calculated.
Relative
Let $I$ be an index number composed of a weighted mean of a number of other index numbers.
Each of those contributing index numbers are referred to as relatives of $I$
Examples
Examples of economic indicators that are often assigned an index number include:
- magnitude of business activity
- wages
- cost of living
- share prices
- imports
and so on.
Arbitrary Example
Let the price of an item $I$ be $50$ in the base year.
Let the price of $I$ be $55$ and $70$ in the two subsequent years.
Then the index number of $I$ based on its price would be $100$, $110$ and $140$ for those successive years.
Also see
- Results about index numbers can be found here.
Linguistic Note
The plural of index is indices.
Compare vertex and apex, which have a similar plural form.
Sources
- 1998: David Nelson: The Penguin Dictionary of Mathematics (2nd ed.) ... (previous) ... (next): index (plural indices)${}$: 1. (index number)
- 2008: David Nelson: The Penguin Dictionary of Mathematics (4th ed.) ... (previous) ... (next): index (plural indices)${}$: 1. (index number)