Question 1 of 19beginner🧠 RememberShort Answer1 mark

An index number which accounts for the relative importance of the items is known as

(i)

weighted index

(ii)

simple aggregative index

(iii)

simple average of relatives

Explanation

The correct answer is option (i) weighted index. The textbook explicitly states that 'An index number becomes a weighted index when the relative importance of items is taken care of.' In contrast, a simple aggregative index is described as 'unweighted, because the relative importance of the items has not been properly reflected.' The context explains that in reality, items differ in order of importance—for example, food items occupy a large proportion of expenditure—and a weighted index accounts for these differences in importance among items.