Is the change in any price reflected in a price index number?
No, the change in any price is not directly reflected in a price index number. A price index represents the changes in prices of multiple commodities by a single numerical measure. It does not show the percentage change for every individual item separately, as that would be confusing when the number of commodities is large.
Moreover, the relative importance or weight of items matters. In reality, items differ in importance. For example, food items occupy a large proportion of expenditure. An equal rise in the price of an item with large weight and an item with low weight will have different implications for the overall change in the price index. The items to be included and the choice of base period are important considerations in constructing an index number.
Explanation
The textbook context clearly explains that a price index condenses multiple price changes into a single measure (Table 7.1 shows different percentage changes for different commodities). It emphasizes that index numbers can be 'unweighted' where items are treated as having equal importance, but in reality, items have different weights. The conclusion section states that 'the items to be included' are important, indicating that not all prices are reflected - only selected items are considered. This is a 3-mark question testing student understanding of the selective and weighted nature of index numbers.