Index Numbers and Ratios When facing a lack of a unit of measure, we often use indicators as surrogates for direct measurement. For example, the height of a column of mercury is a familiar indicator of temperature. No one presumes that the height of mercury column constitutes temperature in quite the same sense that length constitutes the number of centimeters from end to end. However, the height of a column of mercury is a dependable correlate of temperature and thus serves as a useful measure of it. Therefore, and indicator is an accessible and dependable correlate of a dimension of interest; that correlate is used as a measure of that dimension because direct measurement of the dimension is not possible or practical. In like manner index numbers serve as surrogate for actual data. The primary purposes of an index number are to provide a value useful for comparing magnitudes of aggregates of related variables to each other, and to measure the changes in these magnitudes over time. Consequently, many different index numbers have been developed for
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This note was uploaded on 10/06/2011 for the course ECO 6416 taught by Professor Staff during the Spring '08 term at University of Central Florida.