Chain Base Method

¹                     Chain Base Method

Chain Index = 𝐿𝑖𝑛𝑘 𝑟𝑒𝑙𝑎𝑡𝑖𝑣𝑒 𝑜𝑓 𝑡𝑕𝑒 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑦𝑒𝑎𝑟 𝑋 𝑃𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑦𝑒𝑎𝑟 𝑐𝑕𝑎𝑖𝑛 𝐼𝑛𝑑𝑒𝑥

100

The link relative = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑦𝑒𝑎𝑟𝑠 𝑝𝑟𝑖𝑐𝑒

𝑃𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑦𝑒𝑎𝑟𝑠 𝑝𝑟𝑖𝑐𝑒

𝑋 100

Example: 9

Convert the following fixed base index numbers into chain base index numbers:

Year 2002 2003 2004 2005 2006 2007

F.B.I 376 392 408 380 392 400

Solution:

year F.B.I Link Relative Chain Index

2002

2003

2004

2005

2006

2007

376

392

408

380

392

400

……

392

376𝑋 100 = 104.26

408

392𝑋 100 = 104.08

380

408𝑋 100 = 93.14

392

380𝑋 100 = 103.16

400

392𝑋 100 = 102.04

392

376𝑋104.26

100 = 392

392 𝑋 104.08

100 = 408

408𝑋93.14

100 = 380

380𝑋103.16

100 = 392

392𝑋102.04

100 = 400

Merits of Chain Base Method:

i. It is more free from seasonal variation than by the other methods.

ii. Weights can be adjusted as frequently as possible.

Demerits of Chain Base Method:

i. It is a very difficult task to select the items to be included or omitted.

ii. It will affect the subsequent year also

                          Thank you 

NAVEENKUMAR.R

23UCM027 

I B.COM