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Construction of index numbers: There are two ways to construct an index number. They are weighted and unweighted methods of construction. It can also be calculated using both the aggregative and relative average methods. The selection of an appropriate average is required to construct index numbers.

There are different ways of construction of index numbers. In general, construction of index number is further available for the division in two parts: Simple and Weighted. Furthermore, the simple method is classified into simple aggregative and simple relative.

An index is a list of all the names, subjects and ideas in a piece of written work, designed to help readers quickly find where they are discussed in the text. Usually found at the end of the text, an index doesn't just list the content (that's what a table of contents is for), it analyses it.

To compare changes over time, between places, and within categories, index numbers can be used. For example, the cost of living in two locations may differ at the same time, or the cost of living in one city can be compared over two time periods.

Aggregative method of calculating index numbers In this method, the index number (P) = the sum of all the values of all the commodities in the current year (P1) divided by the sum of all the values of the same commodities in the base year (P0) and multiplied by 100.

I) Weighted Aggregative Method: Paasche's Method. Fisher's Ideal Method. Drobish and Bowley's Method. Marshall Edgeworth Method.

Index numbers are values expressed as a percentage of a single base figure. For example, if annual production of a particular chemical rose by 35%, output in the second year was 135% of that in the first year. In index terms, output in the two years was 100 and 135 respectively.

An index starts in a given year, the base year, at an index number of 100. In subsequent years, percentage increases push the index number above 100, and percentage decreases push the figure below 100. An index number of 102 means a 2% rise from the base year, and an index number of 98 means a 2% fall.