Table2-2 Volume of Steel and Newsprint Output
Index Numbers
Economists frequently look at data on prices or quantities and explore
how specific variables change over time. For example, they may be
interested in comparing the time paths of output in two industries: steel
and newsprint. The problem is that it may be difficult to compare the time
paths of the two different variables if we just look at the “raw” data.
Table 2-2 shows some hypothetical data for the volume of output in the
steel and newsprint industries. Because the two variables are measured in
different units, it is not immediately clear which of the two variables is
more volatile or which, if either, has an upward or a downward trend.
Comparing the time paths of two data series is difficult when absolute
numbers are used. Since steel output and newsprint output have quite
different absolute numbers, it is difficult to detect which time series is
more volatile.