Time And Factor Reversal Test Of Index Numbers Pdf


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Explain the various tests of adequacy of Index Number.

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There are certain tests which are put to verify the consistency, or adequacy of an index number formula from different points of view. The most popular among these are the following tests:. At the outset, it should be noted that it is neither possible nor necessary for an index-number formula to satisfy all the tests mentioned above. But, an ideal formula should be such that it satisfies the maximum possible tests which are relevant to the matter under study. However, the various tests cited above are explained here as under:. This test requires that a formula of Index number should be such that the value of the index number remains the same, even if, the order of arrangement of the items is reversed, or altered. As a matter of fact, this test is satisfied by all the twelve methods of index number explained above.

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. Unable to display preview. Download preview PDF.

INDEX NUMBERS Quantitative Aptitude & Business Statistics

Several formulae have been suggested for constructing index numbers and the problem is that of selecting the most appropriate one in a given situation. The different tests are the unit test, time reversal test, factor reversal test, and circular test. This test states that the formula for constructing an index number should be independent of the units in which prices and quantities are expressed. All methods, except simple aggregative method, satisfy this test. Except for unweighted aggregative index number, all other indices satisfy this test. Time Reversal Test:. This test guides whether the method works both ways in time forward and backward.

This paper presents the results of a pilot test performed on a real medium voltage distribution network in Switzerland with the aim of assessing the performance of a fault location system relying on the Electromagnetic Time Reversal EMTR method. Complete the form below to receive an email with the authorization code needed to reset your password. Please try again. Answer 1 of 1 : Time reversal test states that if the time subscripts that are o and n of a price or a quantity index number formula be interchanged, then the resulting price or quantity index formula should be the reciprocal of the original formula. Nuclear physics tests of parity- and time-reversal invariance have both shaped the development of the Standard Model and provided key tests of its predictions. Full Record; Other Related Research The email has already been used, in case you have forgotten the password. Several formulae have been suggested for constructing index numbers and the problem is that of selecting the most appropriate one in a given situation.


Except for unweighted aggregative index number, all other indices satisfy this test​. Time Reversal Test: This test guides whether the method.


Properties and Tests

However the problem still remains of selecting an appropriate method for the construction of an index number in a given situation. The following tests can be applied to find out the adequacy of an index number. Unit Test - This test requires that the index number formulae should be independent of the units in which prices or quantities of various commodities are quoted. For example in a group of commodities, while the price of wheat might be in kgs.

Index Number MCQs | Multiple Choice Questions and Answers | B.Com-CA-CS-CMA Foundation Exam

Tests of Consistency of Index Number

Factor Reversal Test Another test suggested by Fisher is known as factor reversal test. It holds that the product of a price index and the quantity index should be equal to the corresponding value index. If from one year to the next, both price and quantity should double, the price relative would be , the quantity relative , and the value relative The total value in the second year would be four times the value in the first year. In other words, if p1 and p0 represent price and q1 and q0 the quantities in the current year and the base year, respectively, and if p01 represents the change in price in the current year and Q01 the change in quantity in the current year, then If the product is not equal to the value ratio, there is, with reference to this test, an error in one or both of the index numbers. This means, of course, that the formula serves equally well for constructing indices of quantities as for constructing indices of prices, the quantity index being derived by interchanging p and q in the ideal formula.

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(iv) It is the only formula which satisfies the two important tests i.e. The Time Reversal Test' and 'The Factor Reversal Test.' (5) Marshall—Edgeworth's Method.


Factor Reversal Test

Time Reversal Test Prof. Irving Fisher has made a careful study of the various proposals for computing index numbers and has suggested various tests to be applied to any formula to indicate whether or not it is satisfactory. The two most important of these he calls the time reversal test and the factor reversal test. Time reversal test is a test to determine whether a given method will work both ways in time, forward and backward. If the product is not unity, there is said to be a time bias in the method.

Tests for Adequacy of Index Number

Index number was first constructed in:.

Test of adequacy for an Index Number. Index numbers are studied to know the relative changes in price and quantity for any two years compared. There are two tests which are used to test the adequacy for an index number. The two tests are as follows,. The criterion for a good index number is to satisfy the above two tests.

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