Family average monthly expenditure Essay Example

of mathematics to express mathematical ideas correctly and precisely.

considering the value of the mean and the value of standard deviation in the decision making.

Based on my early stage investigation, I would say that my family’s average monthly expenditure is increasing by the year. This could be seen as the difference between this year’s average monthly expenditure and the past years are very big. It is big as the years come as the prices of items are increasing gradually. When the prices of items increases, the average monthly average expenditure also increases. For example when the price of petroleum increases, the expenditure will also increases. This phenomena of price hiking will be continuing as time goes by.

Index numbers are meant to study the change in the effects of such factors which cannot be measured directly. According to Bowley , Index numbers are used to measure the changes in some quantity which we cannot observe directly´. For example, changes in business activity in a country are not capable of direct measurement but it is possible to study relative changes in business activity by studying the variations in the values of some such factors which affect business activity, and which are capable of direct measurement.

Index numbers are commonly used statistical device for measuring the combined fluctuations in a group related variables. If we wish to compare the price level of consumer items today with that prevalent ten years

ago, we are not interested in comparing the prices of only one item, but in comparing some sort of average price levels. We may wish to compare the present agricultural production or industrial production with that at the time of independence. Here again, we have to consider all items of production and each item may have undergone a different fractional increase (or even a decrease). How do we obtain a composite measure.

This composite measure is provided by index numbers which may be defined as advice for combining the variations that have come in group of related variables over a period of time ,with a view to obtain a figure that represents the result of the change in the constitute variables. Index numbers may be classified in terms of the variables that they are intended to measure. In business, different groups of variables in the measurement of which index number techniques are commonly used are

• price,
• quantity,
• value and
• business activity.

Thus, we have index of wholesale prices, index of consumer prices, index of industrial output, index of value of exports and index of business activity, etc. Here we shall be mainly interested in index numbers of prices showing changes with respect to time, although methods described can be applied to other cases. In general, the present level of prices is compared with the level of prices in the past. The present period is called the current period and some period in the past is called the base period.