Index-Numbers gcse Edexcel

Index Numbers

How do I calculate index numbers?

• Index numbers are a way of comparing how the prices of items change over time

  • Prices are compared to what they were in a base year

    • This is a year chosen to be the ‘starting point’ for the index numbers

    • The index number for the base year is 100

• The index number is calculated by the formula

  • 

  • Note that this is very similar to calculating a percentage

    • But percentage signs are not used with index numbers

  • This formula will not be given on the exam, so you need to remember it

• For example, the price of a pint of milk in 2024 is 66p

  • If we use 2007 as the base year, when the price of a pint of milk was 36p

  • then the 2024 index number for milk would be
    

• Note that:

  • An index number greater than 100 means an increase in price

  • An index number less than 100 means a decrease in price

• A base year doesn’t have to be at the ‘beginning’ of a set of index numbers

  • For example, you could choose 2015 as the base year

  • And use that to calculate the index number for 2012

What else can I do with index numbers?

• Index numbers can be used to find the percentage change in prices between the base year and another year

  • Subtract 100 from the index number for the other year

    • The result is the percentage change compared to the base year

    • A positive result means a percentage increase, a negative result means a percentage decrease

  • For example the base year for widgets is 2020, and the index numbers for 2022 and 2023 are 112.3 and 98.4 respectively

    • The percentage change from 2020 to 2022 is (a 12.3% increase)

    • The percentage change from 2020 to 2023 is <img alt=”98.4 minus 100 equals negative 1.6 percent sign” data-mathml=”<math ><semantics><mrow><mn>98</mn><mo>.</mo><mn>4</mn><mo>-</mo><mn>100</mn><mo>=</mo><mo>-</mo><mn>1</mn><mo>.</mo><mn>6</mn>