Question

An index number is called a simple index when it is computed from:
A.Single variable
B.Bi-variable
C.Multiple variables
D.None of them

Answer 1

Hint: Here we will use the concept of the index number. We know that the index number is the number which measures the change in the value of the variable which is measured over time. By using this concept we will find which of the options is correct.

Complete step-by-step answer:
Simple index number is the index number which measures the relative change in the single variable with respect to its base.
So, an index number is called a simple index when it is computed from Single variable.
It is a property of the simple index number that it gives equal value for all the input data.
But, the index number which measures the relative change in the multiple variables with respect to its base then is known as composite index number.
It is a property of the composite index number that it gives the average relative change value of the input data
So, option A is the correct option.

Note: Here we have to note that we should not confuse a simple index number with the composite index number. Index number is generally used in analyzing the relative change of the standard of living of a country. In addition, index number plays a vital role in the making of economic policies.
Index numbers are generally of three types:
(i)Quantity index
(ii)Price index
(iii)Value index