Index Numbers

INTRODUCTION

Over the years, index numbers have become increasingly important forthe
administrationhowindicatorsof the changing economic activity or ofbusiness; de
fact, its use has become theprocedureof wider acceptance.

Index numbers are a simple device to compare the terms of one or

various chronological series; considering the latter as a succession of observations of
a variable taken at successive moments.

In manyproblemsofEconomyIt is interesting to combine, through an appropriate average.

several simple indices have been defined to obtain an index that aims to reflect the
evolutionof a magnitude not easy to define concretely, for example: cost of living, level
ofsalaries, foreign trade, etc.

I. DEFINITION OF INDEX NUMBER

The index number is a measurestatisticsdesigned to put onrelievechanges in a

variable or in agroupofvariablesrelated to thetimegeographical situation
income or any othercharacterstatistics.

This type of number can also be defined as avaluerelative with a base of 100% or
a multiple of 100% such as 10 and 100, which allows measuring how much a variable has changed
with time.

We calculate an index number by finding the quotient of the current value divided by a base value.
Then we multiply the resulting number by 100 to express the index as a percentage.
This final value is the relative percentage. The index number for the base point in time.
it's always 100.

1.1 Other Definitions

Other definitions for index numbers are applied such as:

An index number is a statistical measure aimed at comparing a

economic variable or magnitude over time.
Index numbers measure the size or magnitude of an object at a point.
determined over time, like the percentage of a base or reference in the past.

II. TYPES OF INDEX NUMBERS

In general, an index measures thechangein a variable for a certain period, as in

a time series. However, it can also be used to measure differences in a
variable given in different places. This is done by collectingdatain a way
simultaneous in different places and then comparing them.

Index numbers are important concerning business activities and

economic can be classified into three types:

1. Indices ofprices
2. Quantity indices
3. Index ofvaluesat some point earlier in time (base period) and usually the
current period.
 When only one is understoodproductor merchandise the index is called index
simple as a corporation that consists of a group of elements is called
of composite number. Index numbers provide a way to measure such changes.

The price index compares price levels from one period to another. The index of
prices atconsumer(CPI) measures the global price changes of a variety ofgoods
ofconsumptionand ofservices, and it is used to define the costof life.
The quantity index measures how much the number or amount of a variable changes.
the weather.
The value index measures changes in the total monetary value; that is, it measures the
changes in the value in pesos of a variable, combines the changes inpriceand amount for
present an index with moreinformation.

III. USE OF INDEX NUMBERS

Index numbers are useful when you want to compare variables or magnitudes that are
measurements in different units. For example, with index numbers we can compare the
costs ofnutritionor other services in a city over a year with those of the year
previous, or theproductionof rice in one year in one area of the country with the other area.

Although it is mainly used in Economics andIndustry, index numbers are applicable in

many fields. InEducation, for example, index numbers can be used to
compare theintelligencerelative to students in different locations or in different years.

Many governments are concerned with developing index numbers in order to predict
economic or industrial conditions, such as: price indices, production indices,
salaries, of the consumer,to be able topurchasing power, cost of living, etc.

In theadministrationthey are used as part of acalculationintermediate to better understand another

information.

IV. PROBLEMS RELATED TO INDEX NUMBERS

Several causes may arise that can lead to problems with index numbers, the
which can we mention some of them:

Sometimes, there is difficulty in finding adequate data to calculate an index.

The incomparability of indices arises when attempts are made to compare.
an index with another after there has been a fundamental change in what hasstate
measuring.
3. The inappropriate weighting of factors can distort an index. When developing a
composite index, like the CPI, we must take into account that changes in certain
variables are more important than in others.
4. The distortion of index numbers can also occur when selecting
an inappropriate base. We must always consider how and why the base period
he was selected before accepting a statement based on the outcome of
compare index numbers.

[Link] OF INDEX NUMBERS

Index numbers are classified into:

Simple
2. Compounds, which in turn are classified into:

o Without weighing
o Weighted
5.1 Simple Indices

They refer to a single magnitude orconcept, and therefore, provide us with the
variation that that magnitude has undergone in two different periods. The usual way to express a
simple index is:

I = mtX 100

mo

where mt it is the magnitude in the period t, and moit is the magnitude in the base period.

5.2 Composite Indices

If what we want is to measure the evolution over time of a complex magnitude, or set
of simple magnitudes, such as, for example, the price of fruits, in this case it will not be possible
use a simple index, since we would have different prices for each of the varieties
what presents this type offoods(oranges, apples, pears, etc).

In these cases, we must turn to another type of indices, called in theliteratureindices

compounds, which are obtained by combining the simple indices of each of the
magnitudes that we are analyzing.

There are different ways or criteria to obtain the composite index. A first
classification consists of distinguishing between unweighted composite indices and indices
weighted compounds.

5.2.1 Unweighted Composite Indices

They are the ones who try to measure the evolution of a complex magnitude, but where the different
simple magnitudes that intervene all have the same importance.

5.2.2 Weighted Composite Indices

Although weighted composite indexes can be obtained for all kinds of variables, the
the most important are those that measure variations in prices.

[Link] Price Indices

Among the most commonly used weighted composite indices are those that
refer to price variations. The most important are those of Laspeyres, Paasche and
Fisher.

The common feature of these indices and most price indices is that they use
values as weighting coefficients; that is, data that can be expressed as
product of a price by a quantity.

VI. INDEX OF LIGHTWEIGHT AGGREGATES.

No heavy means that everyonethe valuesconsidered are of equal importance.

Added means that we add or sum all the values. The main advantage is its
simplicity.

(Q1/ Q0) x 100

It is calculated by adding all the elements of the compound, for the given period, and
then dividing this result by the sum of the same elements during the period
base.

The main disadvantage of a lightweight index is that it does not give greater importance or weight to
price change of a commonly used product compared to one that is used infrequently. A
change in the price ofproductsslowlymovementcan distort because
I complete an index. For this reason, it is not common practice to use a simple non-heavy index in
analysisimportant.

A non-weighted index can be distorted by a change in just a few products,

which may not be representative of the situation being studied.

VI. HEAVY AGGREGATES INDEX

We often have to assign greater importance to the changes that occur in some
variables que a los que se presentan en otras cuando calculamos un índice. Esta ponderación
allows us to include more information, apart from the change in prices over time, it allows us
improve the accuracy of the estimation. The problem is deciding how much weight to assign to each
one of the variables in thesample.

The general formula for calculating a heavy aggregate price index is:

P (P1Q/Q0) x 100

There are three ways to weigh an index:

7.1MethodLaspeyres

This method uses the amounts consumed during the base period. It is the most used,
due to requiring quantity measures from only one period. As each number
index depends on the same base prices and quantities, the administration can compare the
index of one period directly with the index of another.

One advantage of this method is the comparability of one index to another. The use of the same
the amount of base period allows us to make direct comparisons. Another advantage is
that many commonly used quantity measures are not tabulated every year. The main one
A disadvantage is that it does not take into account changes in consumption patterns.

7.2 Paasche Method

It is aprocesssimilar to that followed to find a Laspeyres index. The difference

consists of the weights used in the Paasche method are the quantity measures
corresponding to the current period. It is particularly useful because it combines the effects of the
price changes and consumption patterns, thus, it is a better indicator of changes
general economic factors according to the Laspeyres method.

One of the main disadvantages is the need to tabulate quantity measures for each
examined period. Each value of a Paasche price index is the result of both
changes in price as well as in the quantity consumed corresponding to the base period. As
the quantity measures used for an index period are generally different from the
measures of quantity from another period of the index, it is impossible to attribute the difference between the
two indices only to price changes. Consequently, it is difficult to compare indices of
different periods with the Paasche method.

7.3 Fixed Weight Aggregate Method

Instead of using base period or current period weights, use weights taken from a
representative period. The representative weights are known as fixed weights. The latter
and the base prices do not have to come from the same period. The main advantage is the
flexibility in selecting the base price and the fixed weight (amount).

[Link] AVERAGE OF RELATIVES.

8.1 Unweighted average method of relatives.

As an alternative to the aggregate method, we can use the average method.

relatives.

When we have more than one product (or activity), we first find the price quotient.
Actual between the base price for each product and we multiply each quotient obtained by 100.
Then we add the resulting relative percentages and divide the result by the number.
of products.

[(Q1/ Q0) x 100] / n

Using the unweighted average method of relatives, we calculate the average of the quotients.
of the prices for each product. With the method of unweighted aggregates, we calculated the
quotient of the sums of the prices of each product.

It is not the same as assigning some products more weight than others. The averaging method
of relatives converts each element to ascalerelative in which the elements are
represented as a percentage rather than as a quantity. Due to this, each of
The elements of the compound are measured with respect to a base of 100.

8.2 Weighted average method of relatives

With the weighted average methods of relatives, there are several ways to determine a value.
heavy. As in the Laspeyres method, we can use the base value we found
multiplying the base amount by the base price. The use of the base value will produce exactly
the same result as if we were calculating the index using the Laspeyres method.
We use the Laspeyres method when quantity data is obtained more easily.

{[(Q1/ Q0) x 100] PnQn} / PnQn

If we want to calculate a weighted average index of relatives using base values, the
the equation to be used would be:

{[(Q1Q0) x 100] P0Q0}0Q0

When we use current values, we cannot directly compare values of

different periods, as both prices and quantities may have changed. Thus
that we generally use base values or fixed values when calculating an index of
weighted average of relatives.

IX. QUANTITY AND VALUE INDEXES

We can also use index numbers to describe changes in quantities and values.

9.1 Quantity Index

In times of inflation, a quantity index provides a more reliable measure of the

actual production of raw materials and finished goods that the corresponding index of
values. Similarly, agricultural production is better measured if an index is used to
amount, since this eliminates the misleading effects produced by fluctuation of
prices. We often use a quantity index to measure goods that are subject to
a considerable variation in prices.

Any of the methods analyzed to determine price indices can be used to

calculate quantity indexes. When we want to calculate price indexes, we use quantities
values as weights. Now that we want to calculate quantity indices, we use prices or
values like weights.

9.2 Value index.

A value index measures general changes in the total value of a variable. Like the value
is determined both by the price and by thequality, a value index really measures the
combined effects of price and quantity changes.

The main disadvantage of a value index is that it makes no distinction between the effects
of component states.

X. PROBLEMS IN THECONSTRUCTIONOF INDEX NUMBERS.

10.1 Problems in construction

There are several problems in the construction of an index number, of which we can
mention the following:

Selection of an element to be included in a compound

Almost all indices are built to answer a certain particular question. The
the elements included in the compound depend on the question at hand.

Selection of the appropriate weights

The selected weights should represent the relative importance of the different
elements. Unfortunately, what is appropriate in one period may become
inappropriate in a very short period.

Selection of a base period

The selected base period must be a normal period, preferably a period

quite recent. Normal means that the period should not be at a peak or in adepression
from a fluctuation. A technique to avoid the selection of an irregular period is to
average the values of several consecutive periods.

10.2 Warning in the interpretation of an index

Regarding the warnings in the interpretation of an index, we can mention the

next:

Generalization from a specific index

Generalization of the results.

Lack ofknowledgegeneral con respecto a índices publicados

It is the lack of knowledge about what the different indices measure.

 Effect of the passage of time on an index

The factors related to an index tend to change over time, in particular, the
appropriate weights. Unless the weights are changed according to the circumstances, the
the index is becoming increasingly unreliable.

Quality changes

The index numbers do not reflect the changes in the quality of the products they measure. If the
quality has really changed, so the index overestimates or underestimates changes in the
price levels.

CONCLUSION

Index numbers are also called simple index numbers or simple relatives, these
they usually have a duration of the period to be calculated of one year, although it can be a
quarter, one month, or another unit of time. When a time series includes information from
More than two years, there are three ways to calculate simple relatives: 1) Fixed base relatives. 2)
Relatives in link and 3) Relatives in chain.

Composite index numbers can be calculated either with the original data or the
simple relatives.

From a theoretical point of view, it is desirable that the index numbers forgroupsof articles
have the properties that fulfilled the relations (index numbers for a single article).
Any index number that has such or suchpropertyit is said to satisfy the associated criterion
with her. For example, the index numbers that have the property ofinvestmenttemporal itself
will state that it meets the criterion of temporary investment.

No index number is known that meets all the criteria, although in many cases it
satisfy approximately. The ideal Fisher index, which in particular meets the criterion of
temporal investment and factor investment is better than any other useful index number
regarding satisfying the properties considered important (hence the label ideal).

APPLICATION OF INDEX NUMBERS TO MY CAREER

Specifically, in the field of theaccounting, which presents the greatestinterestfor

me (being accounting the career I study), the applications cover almost the entirety
of economic variables, such as production, consumption, or income. But undoubtedly, the most
important refers to the prices.

It can be noted that index numbers are useful for accountants, as numbers
Indices are a kind of barometers of changes in business, they are also important.
to forecast future economic activity.

They are often used in time series analysis, the historical study of trends and
the variations that an economy may have; all this with the aim that the leaders of
businesses and even countries can keep pace with the changing
economic conditions and in this way have better information for a good
decision making.

BIBLIOGRAPHY

PAGESWEBUSED

1. [Link]
2. [Link]
 [Link]
[Link]

BOOKS OFTEXTUSED

STATISTICS FOR ADMINISTRATORS

AUTOR: RICHARD LEAVEN

EDITION: 2ND

EDITORIAL: PRENTICE HALL

AÑO: 1992

2. STATISTICS

AUTOR: MURRIA-SPIEGEL

PUBLISHER: SHAUM SERIES (MC GRAW HILL)

EDITING: 3RD

Larissa G. Martínez Sosa

larissa_kiss@[Link]

DEAN'S OFFICE OF ACCOUNTING

DEPARTMENT OF MATHEMATICS

Statistics I
 Los números índice
Index
1. Introduction
2. The index numbers
3. Conclusions
4. Bibliography

1. Introduction

A fundamental part of the statisticsit is the reduction of large volumes ofdataa

ways to make comparisons and draw conclusions. Thus the mean, deviation
standard, and othersfunctionsthey describe adistributionof frequency. The trend and the indices
of the season, for their part, describe series oftimeThe index numbers are measures
statisticsofdatarelated, and they are used to compare this data through the
time, about a territory or in other ways. In the practice of the administrationand theeconomy
usually there is the difficulty of notpowerrelate a variable at a moment
determined, with the same variable but at another time. The index numbers are the
tool with which you can make this type of comparisons that may refer to
prices, costsprofits, etc.
It is generally possible to add elements of the same class if all the measures are
expressed in the same units. It is possible to measure theproductionannual wheat of a country
adding the one produced by the farmers individually, here all the kilograms of wheat
they are the same, then thevalueof theproductiontotal will make sense. When you want to measure
the compound of changes in the production of various items, which are not expressed in the
the same units of measurement, the productions cannot be summed or averaged, in this
if the use of index numbers becomes necessary.

2. The index numbers

What are they?

The index numbers areindicatorsof various aspects of theindustryand thecommerceThey us
allow for quick comparison of elements such as those over periods of time and
space. Thus, we have index numbers of thecostof thefoodThese numbers will vary with
the date and also with the area of the country to which they refer. The index numbers usually
they start with a base of 100 at a particular time for the entire country. It will be seen that the
index numbers, provide time series, and are subject toanalysisas for
trend and seasonal movements. The index numbers are often calculated
also by territories, for example, the relative amount can be comparedunemploymentin
different provinces or cities. When there are two elements that are of different classes,
for example, the number of bananas and the kilograms of wheat cannot be added, because
so averaged, but we know that the wheat production was 110% of the production
from last year and the banana production was 106%, so we can add and
to average, with which we will obtain that thevolumethe production of those two items was
108%, this result is due to the fact that bothproductsthey have the same importance, since they
they gave them the same weighting, but if banana production is six times more important
that of wheat, the percentages should be weighted in a ratio of 6 to 1. This average of
Relatives are what is known as Index Number.

Types of index numbers

Simple aggregate indices

Thecalculationof an index ofpricesfor themethodsimple aggregate is

muy sencillo. Primero se suman los distintos precios de cada periodo
over time, one of the time periods will be the Base period, it is
say about which the index will be based. The total of each is added.
period and is divided by the total of the base period, the formula for
doing these calculations is:
These results are expressed as a percentage.
From the equation, we see that the simple index of aggregate prices refers to, in the example of the table
1, to find out theincometotals forsaleseach year in the event of selling a
unit of every ten and express that total as a percentage of the base year's income. Like
such that the simple aggregate assigns equal importance to thechangeabsolute of eachpriceIn this
the main flaw of this residesmethod, because it allows a good with apricehigh
master the index.

Good Year

2000 2001 2002

Taking as
base period the
2000 P0($) P1($) P2($)

A 1.00 1,25 1.50

B 10.00 11.75 13.50

C 4.00 5.00 4.50

Total 15.00 18.00 19.50

No. index 1.00 1.20 1.30

% 100 120 130

Table 1
Simple relative average indices
As its name indicates, this type of index consists of averaging the price relatives or
quantities. To calculate a simple average index of relative prices, we must follow the
next steps:

a. We obtain the price relative by dividing the price of the good in a given period by
its price in the base period.
b. We obtain the sums of the relatives of the years and divide each one by the number
ofgoodstogether. The simple average is, in fact, an arithmetic mean of
relatives.

The formula for this method is:

The application of this formula includes the following steps:

a. Multiply the price of each good in each year by the quantity of that good in the year.
base.
b. Obtain the sum of theproductscalculated in step a)
c. Divide the total of each year by the total of the base year.

We can verify what was explained in the following table that takes the same data from table 1.

Good (i) Year

Taking 2000 2001 2002

how
period
base the
2000 p0iq0i p1iq0i p2iq0i

A 10000 = 10000 (1.25) 10000 = 12500 (1,5) 10000 = 15000

B (10) 1000 = 10000 (11.75) 1000 = 11750 (13.5) 1000 = 13500

C (4) 500 = 2000 (5) 500 = 2500 (4,5) 500 = 2250

Total 22000,00 26750,00 30750,00

No. index 1.0 121.6 139.8

Problems in constituting index numbers

Practically, any index number presentsproblemsspecials that are peculiar to him
same. For example, to calculate the price index of theconsumerwe find ourselves facing
a big problem; there are a large number of factors that intervene in thecostof life,
housingnutrition, transportationetc. A weighted average should be used to represent
thesecostsbased on periodic studies of samples. If the cost of thefoodsupload a
10%, but others remain the same, the cost of living rises by that proportion, 10%. This
proportion varies fromfamilyafamilyand an average ratio should be used. This also
it will experience variation with time and territory and it is here that the greatest difficulty arises
when designing an appropriate index number. Furthermore, when the cost of food rises, not
they all increase in the same proportion. For this reason, a 'basket of
markettypical representative of the average grocery purchase for a family. This
the basket, however, will vary over time and if any particular food rises too much
Due to price, the public will switch to cheaper alternatives.
For an index number to be considered ideal, it must meet two considerations:

a. Test ofinvestmentof time.- The base date used for an index number does not
will affect.
 b. Tests ofinvestmentof de facto.- If the numbers are constructed from prices, quantities and
valuestotals (P, Q and V), then to calculate any time:

It must be equal to

In practice, most index numbers satisfy these very closely.

testsbut they don't do it completely.

Important index numbers

Most of the published indices are price indices. The wholesale price index
and the price index for theconsumerprepared by the United States Bureau of Labor
Statistics (BLS), are by far the most important. An important quantitative index
Currently existing is the industrial production index of the Federal Reserve Board.

BLS Producer Price Index

This index was first calculated in 1920, but it has been estimated that its
appearance dates back to the year 1890. Its objectivethe main thing is to show the general movements of
prices at levels ofmarketprimary. The price data used to prepare it are
extracted from those ofsalesin large batches in themarketsprimary, that is the prices
prevalent from the first significant transaction of each good. Most of the
prices listed in the index are prices ofsalefrom manufacturers or producers
representatives.

The index is based on a largesamplefrom 2000 prices ofgoodschosen among 15groups

main and 88 subgroups of goods classified byproductThe object of ashowtan
As large as this is, it is to provide sufficient data to calculate price indices for
subgroups of goods, such as wholesale price indexes of processed foods,
prices of textile products and dresses, and prices ofmetalsand metal products.
The wholesale price index, its components and the series of individual prices are
published monthly. Theinformationprovided by these indices is invaluable for
the economists, managers, and officials ofgovernmentThey allow economists to study the
fluctuations in price levels, assess the imbalance betweendemandyoffer, analyze
thestructureof the prices of theeconomyand the changes in the relationships between goods
individuals etc. The men ofbusinessesthey use thisinformationto determine thecosts
of production, when planningprogramsof investment, when formulating production tables and
policiesof sales, when evaluating theinventoriesand when acquiring raw materials. The officials of
Ministry of Economy in thegovernment, they use them to formulatepoliciesfor stability
economic and long-term policies foreconomic growth.

Consumer Price Index from the BLS

His full name is "Index of changes in the prices of goods andservicesadquiridos por
"workers and urban employees to maintain their standard of living." This index measures thechange
middle of the price of a fixed market basket of goods andservicesacquired by families
of workers and urban employees.
This index was calculated during theWorld War Iunder thepressurefrom thedemandof
increase ofsalariesto cope with the rise in the cost of living, especially in
the centers ofconstructionnaval. It has been published since 1921. This index has been obtained
from a set of approximately 400 carefully selected retail prices
chosen that covertaxesabout sales and about consumption.
From the thousands ofstatisticspublished monthly by government agencies
In North America, the consumer price index is probably the most important.

FRB industrial production index

The industrial production index has been published by the board of governors of thesystemof
the Federal Reserve, since 1927. Its main purpose is to measure the changes in thevolume
industrial and mining production physicist and in the production of theindustriesofgasy
electricity.
It is a weighted average index of relative values of more than 200 different series, each
one of which represents the production of aproductor aindustryparticular or the
hoursmanworked in that industry.
The Federal Reserve index has become one of the most traded commercial indexes.
among those that are published now. This is because it is the best existing index of this
sector of the economy, since it is broad, well elaborated and is constantly being
updated.

Exercises
1) A certain index number has the followingvalues(No. Index 1)

No. Index 1
It is decided to introduce a new base,
1996 = 100, and recalculating the indices of the
previous years, if the indexes meet the
Año 1990 1991 1992 1993 1994 1995 1996
time investment test, which ones
sonthe valuesreviewed?
% 105 110 123 128 128 154 165
a. Yes, it meets the test since the
Base date will not affect the index number.
b. 1996 will be the base, so it will be 100%, to recalculatethe valuesfrom the years
previously, the values of index 1 will need to be divided for the base, and thus the
updated number.

No. Index 2

Year 1990 1991 1992 1993 1994 1995 1996

2)
% 64 67 75 78 78 93 100
The following table gives us the product
gross national product of a country (GNP), in billions of dollars for various years and also the
Consumer Price Index (CPI) for the same years. Adjust the national product.
gross at a consumer price level, to eliminate the element of inflation for the
gross national product.

Year 1980 1985 1990 1995 2000 2005

P.N.B. 99.7 211,9 284,8 398,0 503,7 683,9

I.P.C. 48.8 62.7 83.8 93.3 103.1 109.9

GNP must be divided by the consumer price index to produce GNP.

Adjusted. These figures can then be better represented using an index of 100 for
1980.
 Year 1980 1985 1990 1995 2000 2005

P.N.B.
204.3 338.0 339.9 426.6 488.6 622.3
A.P.I.

Adjusted
a 100
100 165 166 209 239 305
for
1980

3. Conclusions

One of theobjectivesfrom thestatisticsit is to make easier the handling of large volumes of

information.
Index numbers have long been a vital tool for
economists, managers, and even for the government itself, they constitute a great help
since many times it is not possible to handle information that combines several factors
different, such as weight and dollars, for example.
In many countries, countless indices of different things have been calculated, among which...
highlights, price indexes and production indexes, among the price ones we have, for example
the consumer price index or the wholesale price index (raw materials) which are
prepared by the B.L.S. (Bureau of Labor Statistics of the U.S.).
The use of index numbers is very important for various fields, for example in the
government, they are used to determine economic policies.
An index number must be constantly updated, that is, new ones must be made.
calculations so that the index has a more current time period as a base, for example.

4. Bibliography

GARCÍA, Cao, Ed. Stokton&[Link] FOR

COMMERCEAND ECONOMY, Volume II, Cincinnati, 1982.
YAMANE, Taro, Ed. Harla. STATISTICS,MexicoDF.1979.
COOK, Longley, Ed. [Link] STATISTICS,MexicoDF.1981.
KAZMIER, Leonard, Ed. McGraw-Hill. APPLIED STATISTICS TO
ADMINISTRATIONAND THE ECONOMY, U.S. 1978.
CHOU, Ya-Lun, Ed. Interamericana. STATISTICAL ANALYSIS, Mexico City. 1975.
 Percentages and indices.

INTRODUCTION

In this teaching unit, the concept of percentage is studied.

numerous exercises for its application. Also, some concepts are explained.
very present in current life related to percentages such as
Value Added Tax (VAT), simple interest, and the Consumer Price Index
Consumption (CPI).

OBJECTIVES

Knowing how to perform calculations with percentages in everyday situations.

Understand the meaning of VAT and how to calculate it.
Know how to calculate simple interest on a loan or an investment.

Know the meaning of the CPI and how it is calculated.

Percentages.

In the last month of July, some warehouses made a 15% discount on the
June prices for youth clothing items. A pair of pants cost in June
14,40 €. ¿Qué descuento hay que aplicarle? ¿Cuál es su precio de venta en julio?

The percentage is a particular case of proportions. A 15% discount.

it means that for every 100 € of the price of an item, the store discounts 15 €.
the amount of the discount is a magnitude proportional to the original price. Therefore,
To solve the problem, the following direct rule of three must be applied:

And therefore, the applied discount is x = 2.16 €. The final purchase price is 14.40 -
2.16 = 12.24 €.

The percentage is perhaps the most notable example of a function of direct proportionality.
frequency is present in everyday life.

The reason of proportionality in percentage problems is a quotient whose

The denominator always equals 100. Thus, in our example, the ratio is 15/100 = 0.15.
the problem can be solved by multiplying the original price by the ratio of the
proportion, that is, the discount will be 14.40 * 0.15 = 2.16 €.
1. Use the following scene to calculate the discount and the reduced price of
other items from the department: a shirt for €9, a jacket for €34.80
€, another pair of pants for 19.20 € and a polo for 13.20 €. Write the results in your
notebook on a table like the one shown below:

Change the value of the original price using the arrows or enter
directly in the box the desired value and press ENTER. Changing the value
from the percentage you can solve problems in which you receive a discount
different.

July sales
Article Original price Discount Final price
pants 14.40 2.16 12,24
shirt 9.00
jacket 34,80
pants 19,20
polo 13,20

Just before implementing the new prices, the department head decides to increase
the percentage of the discount to be applied to the items at 20% instead of 15%. Calculate them.
amounts of the discounts with that new percentage as well as the new final prices
and write the results in the following table. Use the previous scene to verify
the results by modifying the percentage value.
July sales
Article Original price Discount Final price
pants 14.40
shirt 9.00
jacket 34,80
pants 19,20
polo 13.20

At the end of July, the warehouse decides to apply a new discount of another 20%.
about the current prices in that month. Calculate the prices that should be applied to the
previous articles in the month of August.
August sales
Price Discount on Price on Discount on
Article Final price
original july July August
pants 14.40
shirt 9.00
jacket 34.80
pants 19,20
 polo 13.20

4. Would the result obtained be equivalent if we had calculated 40% of

discount on June prices instead of applying a discount twice of
20% como hemos hecho? Compruébalo y comenta las conclusiones con tus
companions.

More percentage problems.

5. In the school championship, the school's football team played 40 matches of the
who won 25, tied 10, and lost 5 matches. What percentage do they represent?
won, drawn and lost matches?

The problem is very similar to the previous ones. The rule of three needs to be set up.
now in the following way:

Then x = 25*100/40 = 62.5%

In a similar way, the percentage of drawn and lost matches is calculated.

Check your results in the following

scene.

Base is the number of matches played. Value

it is the number of matches won (or lost
or tied in your case).

In my class, there are 28 students. The passed students

Mathematics 20
In the previous evaluation, the following have been:
Calculate the percentage of approved in the Language 17
different subjects. Use the previous scene.
C. Natural 19
to check the results.
Social Sciences 24
E. Physics 27

A slightly more difficult problem.

7. In a store, the price of a jacket has been reduced by 20% and now it
You can buy it for €28.80. What was the original price, before the discount?
Let's call x the original price. It has been reduced by 20%, so it is now sold for a
80% of the original price, that is, 80% of x is equal to 28.80.

Calculate the solution in your notebook and check it in the next scene.

You have to put the discounted price and the indicated discount in the scene.
the problem.

The Value Added Tax (VAT).

When making any purchase, the supplier adds to the price of the item you buy.
a tax called value-added tax (or simply VAT) that
subsequently delivered to the Treasury. The value of that tax is a percentage of the
purchase amount. Depending on what you acquire, the percentage to apply is
different. For example, if you buy a television or a video game for the computer, you must
apply a 16% of the purchase amount; if you buy a book, the rate that is applied
it is 7%.

Let's look at a concrete case: if you buy a computer whose list price is
720 €, to calculate the VAT amount you must apply a rate of 16%. Therefore, the
the amount of the tax will be

720*16/100 = 115.20 €

which, when added to the catalog price, results in a final price of 835.20 €.

The resulting amount of the tax is added to its price, and thus the price is obtained.
of purchase.

8. Calculate the VAT amount and the final price of the following products knowing
its price and the type of VAT to be applied. Write the [Link] the attached table:
Amount of
Product Price without VAT Type of VAT Final price
VAT
A light bulb 0.75 € 16%
A book 13.80 € 7%
Electricity consumption 18,36 € 16%
Bread bar 0,31 € 2%
A pen 7.20 16%

Check your results in the next scene.

You have to show the price without VAT and the VAT rate that
indicate the problem.
9. If the retail price of a product is €63.00 and is subject to
a 16% VAT. What is its price before applying the tax? Check it.
result in the previous scene.

Simple interest.

Financial institutions (banks, savings banks) provide their clients with an amount
annual money that is proportional to the money they have saved or deposited in
they. This amount of money is called interest and is measured as a percentage.
Let's see an example:

Isabel has saved €3,000.00 in the neighborhood savings bank, which gives her a
2.5% annual for this money. What interest does your capital produce at the end of the year?
in 3 years?

That the interest rate is 2.5% means that for every 100 € that Isabel has in
the savings box, it gives you €2.50 a year. For the €3,000 it will give you 2.5%, this
es:

3.000 * 2,5 / 100 = 75,00 €

In three years it will produce three times that amount, that is,

3.000 * 2,5 / 100 * 3 = 225 €

In general, if the deposited capital, the interest rate (also called

interest) and the number of years, the amount of interest produced is given by
the formula:

10. Calculate the interest produced by €4200 deposited at a 6.25% interest rate.
in 5 years.

11. Enrique places a capital in a bank that gives him an interest of 3.75%
annual. When the second year ends, he checks that he has 222 € in his
account. How much money had been deposited at the beginning of the period?

Check your results in the attached scene:

The Consumer Price Index (CPI).

The CPI is an index that reflects each month the variation (increase or sometimes,
decrease) that the prices of the products we consume in Spain suffer.
This index is measured as a percentage. Thus, around the 10th day of this month
the newspapers reported that the CPI had risen by two tenths (0.2%) which means that
The price level has increased that percentage compared to the previous month.

This does not mean that any consumer product (food, gasoline,
electricity, housing) has increased that percentage. The CPI is obtained as a
average of the price variation in the previous month.

The CPI is a very important index, as it is often used as a basis for the
increases in workers' salaries each year.

12. The government anticipated at the end of 1998 that the Consumer Price Index
from the year 1999 would rise by 1.8% and in that percentage the salary of all increased.
employees. Luisa's parents, Pedro and José Alberto, are employees and in
In 1998 they had a salary of 185,000 pesetas, 210,000 pesetas, and 225,000.
monthly pesetas respectively. What will the salary increase be and the salary
in 1999 of the three? And if the government had anticipated that the CPI would rise a
2.1%, what would the new salaries have been in 1999?

Check your results in the attached scene: