Index numbers and their relationship with the economy

Summarises the links between price and volume index numbers and microeconomic theory, introduces recommended formulas for international measurements, and explains how to use them in international price and volume comparisons.

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Index numbers are the basic instrument for synthesizing economic statistics so that the formulas used make it possible to express and describe, for example, the economic growth of a country or the inflation rate of an economy, and also to make international comparisons. If different formulas are used, the results differ and the comparisons are not valid. Hence the importance of knowing the formulas used, and that countries and international organisations promote common practices that harmonise and standardize measurements. Although index numbers are linked to macro economics, their theoretical foundation is based on microeconomics. This publication summarises the links between price and volume index numbers and micro economic theory, introduces recommended formulas for international measurements, and explains how to use them in international price and volume comparisons