in index number of 2000, price is assumed to be 100.
in index number of 2000, price is assumed to be 100.
in index number of which year price is assumed to be 100?
2000
the "index number problem" is the construction of a valid index when both price and quantity change over time. for instance, in the construction of price indices for inflation, the nature of goods in the economy changes over time as well as their prices. a price index constructed in 1950 using a standard basket of goods based on 1950 consumption would not well represent the prices faced by consumers in 2000, as goods in some categories are no longer traded in 2000, new categories of goods have been introduced, and the relative spending on different categories of goods will change drastically. furthermore, the goods in the basket may have changed in quality.
index (economics)
it is often useful to consider implicit price deflators for certain subcategories of gdp, such as computer hardware. in this case, it is useful to think of the price deflator as the ratio of the current-year price of a good to its price in some base year. the price in the base year is normalized to 100. for example, for computer hardware, we could define a "unit" to be a computer with a specific level of processing power, memory, hard drive space and so on. a price deflator of 200 means that the current-year price of this computing power is twice its base-year price - price inflation. a price deflator of 50 means that the current-year price is half the base year price - price deflation. this can lead to a situation where official statistics reflect a drop in prices, even though they have stayed the same.
gdp deflator