Cambridge International as and a level Economics Ebook

Data skill 4 – a working knowledge of 
index numbers
With time-series data especially, it is oft en helpful to show 
the data in index form, with a base year of 100. Th
ereaft er, 
data for subsequent years is shown in the form of an index. 
Th
is avoids some of the diffi
culties mentioned above when 
considering the rate of change in time-series data.
To construct an index number:
■
Identify a base year. This should be typical and is given an 
index of 100.
■
The next year’s figure is then divided by the base year figure 
and multiplied by 100 to give an index figure. For example, 
average income in Chile was:
❏
US$15,600 in 2008
❏
US$16,900 in 2009
❏
US$17,400 in 2010
❏
US$17,600 in 2011
❏
US$18,500 in 2012
❏
US$19,100 in 2013.
If 2008 is taken as the base year, the 2009 figure would be 
converted into an index figure by:
16,900
15,600
×
100 
=
108.3
From this information, it can be seen clearly that income 
rose by 8.3% between 2008 and 2009.
Similarly the index figure for 2010 can be calculated by:
17,400
15,600
×
100 
=
111.5
Table 3 shows the index figures for all the years given above.
All items
Annual 
change
Food & 
drink
Annual 
change
2006
7.9
−
+
+
−
+
6.9
+
+
+
−
+
2007
7.8
10.3
2008
12.0
17.6
2009
17.0
23.5
2010
10.1
12.6
2011
13.7
18.3
Table 2 
Average annual percentage change in consumer 
prices for high-income earners in Pakistan, 2006–2011
Source:
Adapted from
 Pakistan Statistical Yearbook
, 2012