# What do you mean by index number? Explain the types and uses of index numbers.

By BYJU'S Exam Prep

Updated on: September 25th, 2023

Index numbers are used to examine changes in the effects of such variables or factors (or a group of variables) over a predetermined period of time that cannot be directly measured. The following index number kinds are frequently used:

• Price Index Numbers: Changes in wholesale or retail prices are indicated by these index numbers.
• Quantity Index Numbers: These index numbers track shifts in product volume or quantity.

Aggregate index numbers are used to track changes in phenomena such as the cost of living, industrial production, etc. iii. Such index numbers include both the quantities and costs of suitable goods for a specific circumstance.

### Applications of Index Numbers

• A tool for assessing changes in a variable or a group of connected variables is an index number.
• We can track the nation’s industrialization advancement thanks to the industrial activity index number.
• These cost of living index figures reflect fluctuations in the cost of commodities that the average person purchases.
• The government formulates its price plans with the aid of index numbers.
• They are also employed to determine how much money will buy.
• For predicting business and economic activity, business cycles, etc., index numbers are also used.

Summary:

## What do you mean by index number? Explain the types and uses of index numbers.

The change in the influence of such variables or factors over a specific period of time, which cannot be assessed directly, is explained by index numbers. Price index numbers, quantity index numbers, and aggregate index numbers are the different forms of index numbers. The index numbers make it easier to track the development of our nation’s industries.

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