Class 11 Economics Sandeep Garg Solutions Chapter 9 – Index Numbers
FAQs on Sandeep Garg Economics Class 11 Chapter 9 Solutions
1. What is the Laspeyres method for calculating index numbers as explained in Sandeep Garg Class 11 Chapter 9 Solutions?
The Laspeyres method, as detailed in the solutions for Chapter 9, calculates a price index using base period quantities (q₀) as weights. The formula is (Σp₁q₀ / Σp₀q₀) × 100, where p₁ is the current year price and p₀ is the base year price. This method essentially measures the change in the cost of purchasing the same basket of goods from the base year at current year prices.
2. How should I approach solving the unsolved practical problems for Index Numbers in Sandeep Garg's textbook?
To effectively solve the unsolved practical problems from Sandeep Garg Chapter 9, follow these steps:
Read the question carefully to identify what needs to be calculated (e.g., Price Index, Quantity Index).
Identify the method required: Determine if it's a simple aggregative, weighted aggregative (like Laspeyres', Paasche's, or Fisher's), or a Consumer Price Index problem.
Organise your data in a table, clearly listing prices (p₀, p₁) and quantities (q₀, q₁) for both the base and current years.
Apply the correct formula accurately and perform the calculations step-by-step.
Check your final answer to ensure it logically represents the economic change being measured.
3. Why is Fisher's Index Number often referred to as an 'ideal' index number in the context of Chapter 9 problems?
Fisher's Index Number is called 'ideal' because it possesses several desirable mathematical properties that other indices lack. It is the geometric mean of the Laspeyres' and Paasche's indices, which helps in balancing out the upward bias of Laspeyres' method and the downward bias of Paasche's method. Most importantly, it satisfies both the Time Reversal Test and the Factor Reversal Test, making it a theoretically superior and more consistent measure of change.
4. What are the key differences between the Laspeyres, Paasche, and Fisher's methods for calculating index numbers?
The primary difference lies in the weights used for calculation:
Laspeyres' Method: Uses base year quantities (q₀) as weights. It tends to have an upward bias.
Paasche's Method: Uses current year quantities (q₁) as weights. It tends to have a downward bias.
Fisher's Method: It is the geometric mean of the Laspeyres and Paasche indices. It does not use a single set of weights but instead combines both, making it free from the biases of the other two methods.
5. How does the calculation of the Consumer Price Index (CPI) in Sandeep Garg's solutions reflect changes in the cost of living?
The Consumer Price Index (CPI), or cost of living index, measures the average change over time in the prices paid by urban consumers for a specific basket of consumer goods and services. By calculating the cost of this fixed basket in the current year relative to a base year, the solutions demonstrate how purchasing power is affected by inflation. A rising CPI indicates that a household has to spend more to maintain the same standard of living, thus reflecting an increase in the cost of living.
6. What are some common mistakes to avoid when solving practical questions on weighted index numbers from Chapter 9?
When solving problems on weighted index numbers, students should be careful to avoid these common errors:
Mixing up variables: Confusing base year price (p₀) with current year price (p₁) or base year quantity (q₀) with current year quantity (q₁).
Incorrect formula application: Using the Laspeyres formula when Paasche's is required, or vice versa.
Calculation errors: Simple mistakes in multiplication (p₁q₀, p₀q₀, etc.) or summation (Σ).
Ignoring the '× 100': Forgetting to multiply the final fraction by 100 to express the index correctly.
Referring to detailed Sandeep Garg solutions can help clarify these steps and prevent errors.
7. What is the role of the 'base year' in the Sandeep Garg solutions for Chapter 9, and how is it chosen?
In index number calculations, the base year serves as the primary benchmark or reference point against which changes are measured. The index for the base year is always taken as 100. An ideal base year should be a period of relative economic stability, free from major events like droughts, wars, or economic crises. This ensures that the comparison between the current year and the base year is meaningful and not distorted by abnormal fluctuations, allowing for a stable comparison.
