Properties and Tests

Abstract

The new index numbers, which were introduced in Chapter 3, were designed not only to avoid the one-sidedness of the Laspeyres and Paasche measures of volume and price change, but also to meet the requirements of multiplicative as well as additive analysis of value changes of commodity aggregates into a volume and a price component. Having been designed with these objectives in mind, these index numbers have a number of properties which make them particularly suitable measures of volume and price change from an analytical point of view. In this chapter we aim to find out what these properties are, the extent to which they are shared by other index numbers and also whether by any chance the other index numbers have any useful properties which the new index numbers do not have. The method by which we establish whether or not a given type of index number possesses certain properties is the time-honoured one of applying appropriate tests to it.