INDEX NUMBERS are used by eco nomic statisticians to measure the amount of change that takes place in the value of money, as shown in its rela tive purchasing power. It is obvious that money itself could not be used as the measure of its own value, nor could any one commodity which would be pur chased with a fixed sum of money be used, since single commodities fluctuate in value even more than money. How ever, the average price fluctuations of a number of Jifferent commodities show very clearly the amount of change that has taken place in the value of money. These totals of average prices for a year form the basis of comparison for varia tions, and are called index numbers.
The averages, to be exact, must be "weighted," which consists of giving commodities different degrees of impor tance, since in a list including potatoes and fountain pens, the potatoes should of course be given a higher weight, because more money is spent on them than on fountain pens.
In the United States the Bureau of Labor, Bradstreets, and Babson's com pile and publish index numbers, while the "London Economist" and the British Board of Trade are the leading English authorities, all of which usually agree about the general trend of prices.
Because of the greater ease with which prices may be collected and because of the more general standardization of quality, the wholesale prices are used in computing the index numbers. The av erage may be computed harmonically, geometrically, or the simple unweighted arithmetic average may be used. The later method, if done intelligently, pro duces results which do not vary greatly from those obtained by the more elabor ate methods.