In the previous chapters we dealt with measures of central tendency and measures of spread of data. Now we shall learn how to obtain summary measures for change in a group of related variables.
An "index" for the layman is an "indicator" and nothing more. "Index numbers" or "indices" are plural forms but they all mean the same thing. An index number represents the magnitude of the changes between two (or more) periods of time or places, in a number of variables. The word ''variable" means those attributes which are quantifiable, such as the prices of commodities or population, etc.
Many government and private agencies are engaged in computation of index
numbers or indices as they are often required for the purpose of forecasting business and economic conditions, providing general information, etc. It is not always necessary that the comparison should be over time, but very often index numbers measure changes over time. Similarly, index numbers may be constructed for studying changes in any variable, such as intelligence, aptitude, efficiency, production, etc.,but the time series of prices is perhaps most frequently used.