Index numbers are used to measure the changes happened in a variable over a period of time. This is an effective method to analyze the variable and how it has affected the related factors. In our daily life, it usage is very common such as it is used to measure the price changes of products or services from one year to the other.
Example
Compare the prices of a food item based on the data given below:
| Year | Per Unit Pice $ |
| 20002017 | 100130 |
Price Index = (Price in Current Year / Price in Base Year) x 100 = (130 / 100) x 100 = 130 {1bb28fb76c3d282be6cfd0391ccf1d9529baae691cd895e2d45215811b51644c}
The price index calculated above shows that the price of the food item has increased by 30 {1bb28fb76c3d282be6cfd0391ccf1d9529baae691cd895e2d45215811b51644c} in 2017 as compared to 2000.