Tamilnadu State Board New Syllabus Samacheer Kalvi 12th Business Maths Guide Pdf Chapter 9 Applied Statistics Ex 9.2 Text Book Back Questions and Answers, Notes.

## Tamilnadu Samacheer Kalvi 12th Business Maths Solutions Chapter 9 Applied Statistics Ex 9.2

Question 1.

Define Index Number.

Solution:

“An Index Number is a device which shows by its variations the Changes in a magnitude which is not capable of accurate measurements in itself or of direct valuation in practice”. – Wheldon

“An Index number is a statistical measure of fluctuations in a variable arranged in the form of a series and using a base period for making comparisons” – Lawrence J Kaplan

Question 2.

State the uses of Index Number.

Solution:

- The index number is an important tool for formulating decision and management p policies.
- It helps in studying the trends and tendencies.
- It determines the inflation and deflation in an Economy.

Question 3.

Mention the classification of Index Number.

Solution:

Classification of Index Numbers:

Index number can be classified as follows:

- Price Index Number: It measures the general changes in the retail or wholesale price level of a particular or group of commodities.
- Quantity Index Number: These are indices to measure the changes in the number of goods manufactured in a factory.
- Cost of living Index Number: These are intended to study the effect of change in the price level on the cost of living of different classes of people.

Question 4.

Define Laspeyre’s Price index number.

Solution:

Laspeyres Price index number

P\(_{ 01 }^{L}\) ⥪ \(\frac { Σp_1q_0 }{Σp_0q_0}\) × 100

where P_{1} = Current year price

p_{0} = base year price

q_{0} = base year quantity

Question 5.

Explain Paasche’s price index number.

Solution:

Paasches price index number

P\(_{ 01 }^{L}\) = \(\frac { Σp_1q_1 }{Σp_0q_1}\) × 100

where P_{1} = current year price

q_{1} = current year quantity

p_{0} = base year price

q_{0} = base year quantity

Question 6.

Write note on Fisher’s price index number.

Solution:

Fishers price index number

P^{F} = \(\sqrt { P^L×P^P}\)

P\(_{ 01 }^{F}\) = \(\sqrt { \frac{Σp_1p_0×Σp_1q_1}{Σp_0q_0×Σp_0q_1}}\) × 100

where P_{1} = current year price

q_{1} = current year quantity

p_{0} = base year price

q_{0} = base year quantity

Question 7.

State the test of adequacy of index number.

Solution:

There are two tests which are used to test the adequacy for an index number. The two tests are as follows

(i) Time Reversal Test

(ii) Factory Reversal Test

Question 8.

Define Time Reversal Test.

Solution:

It is an important test for testing the consistency of a good index number. This test maintains time consistency by working both forward and backward with respect to time (here time refers to base year and current year). Symbolically the following relationship should be satisfied. P_{01} × p_{10} = 1

Fisher’s index number formula satisfies the above relationship

P\(_{ 01 }^{F}\) = \(\sqrt { \frac{Σp_1p_0×Σp_1q_1}{Σp_0q_0×Σp_0q_1}}\)

when the base year and current year are interchanged, we get

P\(_{ 10 }^{F}\) = \(\sqrt { \frac{Σp_0q_1×Σp_0q_0}{Σp_1q_1×Σp_1q_0}}\)

P\(_{ 01 }^{F}\) × P\(_{ 10 }^{F}\) = 1

Question 9.

Explain factor reversal test.

Solution:

This is another test for testing the consistency of a good index number. The product of price index number and quantity index number from the base year to the current year should be equal to the true value ratio. That is, the ratio between the total value of current period and total

value of the base period is known as true value ratio. Factor Reversal Test is given by,

where P_{01} is the relative change in price

Q_{01} is the relative change in quantity.

Question 10.

Define true value ratio.

Solution:

The ratio between the total value of the current period and the total value of the base period is known as the true value ratio.

(i.e) true value ratio = \(\frac{\sum p_{1} q_{1}}{\sum p_{0} q_{0}}\)

Question 11.

Discuss the Cost of the Living Index Number.

Solution:

Cost of living index numbers are generally designed to represent the average change over time in the prices paid by the ultimate consumer for a specified quantity of goods and services cost of living index number is also known as the consumer price index number.

It is well known that a given change in the level of prices (retail) affects the cost of living of different classes of people in different manners. The general index number fails to reveal this. Therefore it is essential to construct a cost of living index number which helps us in determining the effect of rise and fall in prices on different classes of consumers living in different areas.

Question 12.

Define family budget method.

Solution:

Family Budget Method:

In this method, the weights are calculated by multiplying prices and quantity of the base year.

(i.e.) V = Σp_{0}q_{0}. The formula is given by,

Cost of Living Index Number = \(\frac{\sum \mathrm{PV}}{\sum \mathrm{V}}\)

where P = \(\frac{p_{1}}{p_{0}} \times 100\) is the price relative

V = Σp_{0}q_{0} is the value relative

Question 13.

State the uses of cost of Living Index Number.

Solution:

(i) It indicates whether the real wages of workers are rising or falling for a given time.

(ii) It is used by the administrators for regulating dearness allowance or grant of bonus to the workers.

Question 14.

Calculate by a suitable method, the index number of price from the following data:

Solution:

Question 15.

Calculate price index number for 2005 by (a) Laspeyre’s (b) Paasche’s method

Solution:

Question 16.

Calculate price index number for 2005 by (a) Laspeyre’s (b) Paasche’s method

Solution:

Question 17.

Using the following data, construct Fisher’s Ideal index and show how it satisfies Factor Reversal Test and Time Reversal Test?

Solution:

Question 18.

Using the following data, construct Fisher’s Ideal index and show how it satisfies Factor Reversal Test and Time Reversal Test?

Solution:

Question 19.

Calculate Fisher’s index number to the following data. Also show that it satisfies Time Reversal Test.

Solution:

Question 20.

Th following are the group index numbers and the group weights of an average working class family’s budget. Construct the cost of living index number:

Solution:

Question 21.

Construct the cost of living Index number for 2015 on the basis of 2012 from the following data using family budget method.

Solution:

Question 22.

Calculate the cost of living index by aggregate expenditure method:

Solution: