FREE IGNOU MCO-03 SOLVED ASSIGNMENT 2023

b) Price Indices and Value Indices

Price Indices: Price indices are statistical measures used to track the changes in the prices of goods and services over time. They are essential for understanding inflation, deflation, and overall price movements in an economy. Price indices are calculated based on the weighted average of the prices of a selected basket of goods and services at different points in time. The key characteristics of price indices are:

1. Measurement of Price Changes: Price indices measure the percentage change in the average prices of a specific basket of goods and services between two time periods.
2. Inflation and Deflation: A rising price index indicates inflation (increase in general price levels), while a declining index indicates deflation (decrease in general price levels).
3. Base Period: A specific time period is chosen as the base period with a price index of 100. Subsequent periods are expressed relative to this base period.
4. Weighting: Different goods and services in the basket are assigned weights based on their relative importance in the overall consumption expenditure of the population.
5. Types of Price Indices: Commonly used price indices include the Consumer Price Index (CPI), Producer Price Index (PPI), and Wholesale Price Index (WPI).

Value Indices: Value indices, also known as quantity indices or volume indices, measure the changes in the quantity or volume of goods and services produced, consumed, or traded over time. They provide insights into changes in physical quantities, excluding the impact of price fluctuations. The key characteristics of value indices are:

1. Measurement of Quantity Changes: Value indices measure the percentage change in the physical quantity or volume of goods and services between two time periods.
2. Base Period: A specific time period is chosen as the base period with a value index of 100. Subsequent periods are expressed relative to this base period.
3. Weighting: Different goods and services in the index are assigned weights based on their relative importance or contribution to the overall quantity.
4. Types of Value Indices: Value indices can be applied to various sectors, such as industrial production index, retail sales index, and volume of exports or imports.