HOW CAN WE CALCULATE AN INDEX?
Indexes are calculated by comparing variations in quantity from one time period to the next. For a price index the calculation is the price from one time period divided by the base period price. In the following example the 'Widget Price Index" started in 2005. The following table demonstrates how a 'Widget Price Index' would be calculated in 2006 and 2007. The percentage change in the price index from 2006 to 2007 is
Prices of Widgets 2005-2007
Price per Widget ($)
Widget Price Index
This page last updated 26 June 2008