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ihe
e started our calculations by expressing prices in our base
ear as 100.
Another step in the making of index numbers which often
uzzles those who have not studied the subject is what is
Zrmed “weighting.” This again is quite simple when
» derstood. It is quite evident that when a large number
a f different commodities are combined together, some are very
uch more important than others. Thus, wheat is of far
! eater importance in commerce and the life of the nation than,
1y, such a comparatively unimportant item as lemons.
f they were all included together on an equal footing, a violent
1ovement in the price of lemons might nullify a very small
lovement in the price of wheat, and give a totally wrong
npression of the movement of prices in general as it affects
2e standard of living of the people. To give them their
lative importance in the economic structure, therefore,
weights” are assigned. These are fixed multipliers of each
*parate item, and when the sum of the weighted individual
% sries is found, it is divided by the sum of the weights. In
fhe list of commodities included in the present index there
ill be seen the weights assigned to each item. That a
weighted” index number is more correct than an ‘‘un-
eighted” is now accepted by all leading statisticians.
Index numbers are no more mysterious than the example
te have given. They provide a very useful and simple way
[ measuring the rise and fall of prices as a whole and are
ow widely used; in fact all countries have their index
umbers and most have several calculated in different ways.
Ve have indicated above only the simplest form of index
umbers; but although the basic principle remains the same,
aere is a wide diversity in the methods used in compiling
1em and mathematicians have expended much thought in
erfecting the technique of such compilations. It is quite
™nnecessary to follow the subject further; but it will, of
gf burse, be readily seen that the present index number of
‘holesale prices in Canada is not quite so simple an affair
5 that described above. But, however complicated the
i} 1ethod used, the result is simply a device for measuring the
1 eneral rise or fall of prices over a given period of time.
4 The compilation of the New Index Number of Wholesale Prices of
*1"he Canadian Bank of Commerce was made by the staff of the Statistical
* lepartment of the Bank, under the general supervision of Mr. H, Michell,
rofessor of Political Economy in McMaster University, Toronto.
19
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