Quantity index
Also called: Volume index, Production index · Topic: Inflation and Index Numbers: CPI, WPI, IIP and the Deflator · NCERT: Class 11, Ch 7 "Index Numbers"
Meaning
A quantity index (also called a volume index) measures changes in physical volume, such as tonnes produced, houses built or people employed. Prices do not enter it. It shows whether "more" or "less" is being produced. It is built from quantity relatives, (q₁/q₀) × 100, which are usually weighted.
Example
India's Index of Industrial Production (IIP) is a monthly quantity index compiled by the NSO (MoSPI). Its base was 2011-12 = 100 from April 2017. It weights quantity relatives by base-year value added, using the Laspeyres formula. In the 2011-12 series, manufacturing had the largest sectoral weight (77.6).
Don't confuse with
- Price index (CPI, WPI): it tracks changes in prices, not volumes. "The IIP is a price index" is a common Prelims trap. It is FALSE.
- Value index: it tracks price × quantity together. The NCERT checklist warns that a volume index is the wrong tool when you need a value index.
Related concepts
- Index number
- Price index
- Simple aggregative price index
- Weighted index
- Weighted aggregative price index
- Laspeyres price index
- Paasche price index
- Price relative
- Method of averaging relatives
- Weighted index of price relatives