Table2-3 Constructing Index Numbers
We start by taking the value of the variable at some point in time as the
“base” with which the values in other periods will be compared. We call
this the base period. In the present example, we choose 2010 as the base
year for both series. We then take the output in each subsequent year,
called the “given year,” divide it by the output in the base year, and then
multiply the result by 100. This gives us an index number for the output
of steel and a separate index number for the output of newsprint. For
each index number, the value of output in the base year is equal to 100.
The details of the calculations are shown in Table 2-3.
Index numbers are calculated by dividing the value in the given year by
the value in the base year and multiplying the result by 100. The 2020
index number for steel tells us that steel output in 2020 was 22.5 percent
greater than in the base year, 2010. The 2020 index number for newsprint
tells us that newsprint output in 2020 was 93.8 percent of the output in
the base year, 2010.