chain base method
CHAIN BASE METHOD
CHAIN BASE METHOD
In chain base method price changes are measured, of different years (I,e Current year) by comparing the prices with previous years of the selected data.
For Example:
Years: 2002, 2003, 2004, 2005, 2006, 2007
Prices: 10, 12, 13, 15, 16, 18
Here the arrows shows price comparison of every new year(current year) with its previous year(2003 with 2002, 2004 with 2003, etc.)
Formula:
I.N=Pn/Pr.(100) (Link Relatives).
Here:
"Pn" is price of current year.
"Pr" is price of previous year.
"100" is for obtaining the answer in "Percentage
Fixed Base method
1. It is easy to understand by a Common man as each year's price is Percentage of a fixed base year's price.
2. It is simple to calculate as the denominator denominator remains fixed for all the cases.
3. Here, the base period remains fixed.
4. It is very rigid, and so, it does not easily inclusion Permit accommodation of new items deletion of the outdated ones.
5. It does not permit frequent alterations of the weights of different items.
6. It does not facilitate comparison between two adjacent periods.
7. It is greatly affected by seasonal variations
8. It does not involve any problem in Calculating the indices of the subsequent Periods when data of any year is missing.
Chain base method
.
1. It is difficult to understand by a common common man as different year's price is expressed as Is expressed as percentage of different base year's price.
2.It is difficult and tedious to calculate as the changes every time.
3. Here, the base period changes from year to year.
4. It is quite flexible and, so, it easily permits the and exclusion of some items.
5. It permits frequent adjustment of the weights of different items.
6. It facilitates comparison between two adjacent periods.
7. It is least affected by seasonal variations.
8. It creates problems in calculating the subsequent indices when the data
Example 1
Example 2
Thank you
23ucm036
I. Bcom
P. Sukumar
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