Additional

Mathematics
Project Work 4

Lukmanulhakim awaluddin
930423125069
S.m.k agama kota kinabalu
lukman
ℜ Acknowledgement..................................................

ℜ Objectives...............................................................

ℜ Introduction ...........................................................

ℜ Part 1......................................................................

ℜ Part 2......................................................................

ℜ Part 3......................................................................

ℜ Further Explorations...............................................

ℜ Reflections............................................................

ℜ Conclusion..............................................................
 Acknowledgement
First of all, I would like to say Alhamdulillah, for giving me the strength and health
to do this project work and finish it on time.

Not forgotten to my parents for providing everything, such as money, to buy

anything that are related to this project work, their advise, which is the most needed for
this project and facilities such as internet, books, computers and all that. They also
supported me and encouraged me to complete this task so that I will not procrastinate in
doing it.

Then I would like to thank to my teacher, Mdm Fazilah for guiding me throughout
this project. Even I had some difficulties in doing this task, but she taught me patiently
until we knew what to do. She tried and tried to teach me until I understand what I’m
supposed to do with the project work.

Besides that, my friends who always supporting me. Even this project is
individually but we are cooperated doing this project especially in disscussion and
sharing ideas to ensure our task will finish completely.

Last but not least, any party which involved either directly or indirect in
completing this project work. Thank you everyone.
The aims of carrying out this project work are:

i. To apply and adapt a variety of problem-solving strategies to solve

problems.

ii. To improve thinking skills.

iii. To promote effective mathematical communication.

iv. To develop mathematical knowledge through problem solving

in a way that increases students’ interest and confidence.

v. To use the language of mathematics to express mathematical

ideas precisely.

vi. To provide learning environment that stimulates and enhances

effective learning.

vii. To develop positive attitude towards mathematics.

 Introduction
A Brief History Of Statistic

By the 18th century, the term " statistics" designated the systematic
collection of demographic and economic data by states. In the early 19th
century, the meaning of "statistics" broadened, then including the discipline
concerned with the collection, summary, and analysis of data. Today statistics is
widely employed in government, business, and all the sciences. Electronic
computers have expedited statistical computation, and have allowed statisticians
to develop "computer -intensive" methods.

The term "mathematical statistics" designates the mathematical theories

of probability and statistical inference, which are used in statistical practice. The
relation between statistics and probability theory developed rather late, however.
In the 19th century, statistics increasingly used probability theory, whose initial
results were found in the17th and 18th centuries, particularly in the analysis of
games of chance (gambling). By 1800, astronomy used probability models and
statistical theories, particularly the method of least squares, which was invented
by Legendre and Gauss. Early probability theory and statistics was systematized
and extended by Laplace; following Laplace, probability and statistics have been
in continual development.

In the 19th century, social scientists used statistical r easoning and

probability models to advance the new sciences of experimental psychology and
sociology; physical scientists used statistical reasoning and probability models to
advance the new sciences of thermodynamics and statistical mechanics.
 The development of statistical reasoning was closely associated with the
development of inductive logic and the scientific method. Statistics is not a field
of mathematics but an autonomous mathematical science , like computer science
or operations research. Unlike mathematics, statistics had its origins in public
administration and maintains a special concern with demography and economics.
Being concerned with the scientific method and inductive logic, statistical theory
has close association with the philosophy of science ; with its emphasis on
learning from data and making best predictions, statistics has great overlap with
the decision science and microeconomics. With its concerns with data, statistics
has overlap with information science and computer science .

Statistics Today

During the 20th century, the creation of precise instruments for

agricultural research, public health concerns (epidemiology, biostatistics,
etc.),industrial quality control, and economic and social purposes (unemployment
rate, econometry, etc.) necessitated substantial advances in statistical practices.

Today the use of statistics has broadened far beyond its origins.
Individuals and organizations use statistics to understand data and make
informed decisions throughout the natural and social sciences, medicine,
business, and other areas. Statistics is generally regarded not as a subfield of
mathematics but rather as a distinct, albeit allied, field. Many universities
maintain separate mathematics and stati stics departments. Statistics is also
taught in departments as diverse as psychology, education, and public health.
Index Number

Index numbers are today one of the most widely used statistical indicators.
Generally used to indicate the state of the economy, index numbers are aptly
called ‘barometers of economic activity’. Index numbers are used in comparing
production, sales or changes exports or imports over a certain period of time.
The role-played by index numbers in Indian trade and industry is impossible to
ignore. It is a very well known fact that the wage contracts of workers in our
country are tied to the cost of living index numbers.

By definition, an index number is a statistical measure designed to show

changes in a variable or a group or related variables with respect to time,
geographic location or other characteristics such as income, profession, etc.

Characteristics of an Index Numbers

1. These are expressed as a percentage: Index number is calculated as a ratio

of the current value to a base value and expressed as a percentage. It must be
clearly understood that the index number for the base year is always 100. An
index number is commonly referred to as an index.

2. Index numbers are specialized averages: An index number is an average

with a difference. An index number is used for purposes of comparison in cases
where the series being compared could be expressed in different units i.e. a
manufactured products index (a part of the whole sale price index) is constructed
using items like Dairy Products, Sugar, Edible Oils, Tea and Coffee, etc. These
items naturally are expressed in different units like sugar in kgs, milk in liters, etc.
The index number is obtained as a result of an average of all these items, which
are expressed in different units. On the other hand, average is a single figure
representing a group expressed in the same units.

3. Index numbers measures changes that are not directly measurable: An

index number is used for measuring the magnitude of changes in such
phenomenon, which are not capable of direct measurement. Index numbers
essentially capture the changes in the group of related variables over a period of
time. For example, if the index of industrial production is 215.1 in 1992-93 (base
year 1980-81) it means that the industrial production in that year was up by 2.15
times compared to 1980-81. But it does not, however, mean that the net increase
in the index reflects an equivalent increase in industrial production in all sectors
of the industry. Some sectors might have increased their production more than
2.15 times while other sectors may have increased their production only
marginally.

Uses of index numbers

1. Establishes trends
Index numbers when analyzed reveal a general trend of the phenomenon under
study. For eg. Index numbers of unemployment of the country not only reflects
the trends in the phenomenon but are useful in determining factors leading to
unemployment.

2. Helps in policy making

It is widely known that the dearness allowances paid to the employees is linked
to the cost of living index, generally the consumer price index. From time to time
it is the cost of living index, which forms the basis of many a wages agreement
between the employees union and the employer. Thus index numbers guide
policy making.
3. Determines purchasing power of the rupee
Usually index numbers are used to determine the purchasing power of the rupee.
Suppose the consumers price index for urban non-manual employees increased
from 100 in 1984 to 202 in 1992, the real purchasing power of the rupee can be
found out as follows: 100/202=0.495 It indicates that if rupee was worth 100
paise in 1984 its purchasing power is 49.5 paise in 1992.

4. Deflates time series data

Index numbers play a vital role in adjusting the original data to reflect reality. For
example, nominal income(income at current prices) can be transformed into real
income(reflecting the actual purchasing power) by using income deflators.
Similarly, assume that industrial production is represented in value terms as a
product of volume of production and price. If the subsequent year’s industrial
production were to be higher by 20% in value, the increase may not be as a
result of increase in the volume of production as one would have it but because
of increase in the price. The inflation which has caused the increase in the series
can be eliminated by the usage of an appropriate price index and thus making
the series real.

Types of index numbers

Three are three types of principal indices. They are:

1. Price Index
The most frequently used form of index numbers is the price index. A price
index compares charges in price of edible oils. If an attempt is being made to
compare the prices of edible oils this year to the prices of edible oils last year, it
involves, firstly, a comparison of two price situations over time and secondly, the
heterogeneity of the edible oils given the various varieties of oils. By constructing
a price index number, we are summarizing the price movements of each type of
oil in this group of edible oils into a single number called the price index. The
Whole Price Index (WPI). Consumer Price Index (CPI) are some of the popularly
used price indices.

2. Quantity Index
A quantity index measures the changes in quantity from one period to
another. If in the above example, instead of the price of edible oils, we are
interested in the quantum of production of edible oils in those years, then we are
comparing quantities in two different years or over a period of time. It is the
quantity index that needs to be constructed here. The popular quantity index
used in this country and elsewhere is the index of industrial production (HP). The
index of industrial production measures the increase or decrease in the level of
industrial production in a given period compared to some base period.

3. Value Index
The value index is a combination index. It combines price and quantity
changes to present a more spatial comparison. The value index as such
measures changes in net monetary worth. Though the value index enables
comparison of value of a commodity in a year to the value of that commodity in a
base year, it has limited use. Usually value index is used in sales, inventories,
foreign trade, etc. Its limited use is owing to the inability of the value index to
distinguish the effects of price and quantity separately.
Calculating index number

• Index number Is a measure used to show the change of a certain quantity for a
stated period of time by choosing a specific time as the base year. In general an
index number is the comparison of a quantity at two different times and is
expressed as a percentage.


= × 100
1

 0

I = index number
Q1 = quantity at specific time

Qo = quantity at base time

• The composite index is the weighted mean for all the items in a certain situation.

Ī = 
Ī = Composite index

W = weightage
 = index number
Part 1
 The prices of good sold in shops are vary from one shop to another. Shoppers
tend to buy goods which are not only reasonably priced but also give value for their
money. I had carried out a survey on four different items based on the following
categories which is food, detergent and stationery. The survey was done in three
different shops. Informations below shows the results from my research.

Question (a)

Picture

Stationery

Food

Detergent
Question (b)

Data
Category Item Price
Giant Servay khidmat
Food 1.self-raising flour 2.70 3.70 3.30
2.sugar 1.80 1.60 1.35
3.butter 3.60 2.90 3.00
4.Eggs(grade A) 3.60 2.90 3.00
Total price 11.70 12.00 12.15
Detergent 1.Washing powder 19.00 21.00 20.50
2.dish washer 4.00 3.20 2.10
3.liquid bleach 6.00 5.50 4.90
4.tile cleaner 10.20 9.80 9.50
Total price 39.20 39.50 38.00
Stationary 1.pencil(shaker) 8.90 9.20 8.20
2.highlighter 3.50 2.90 3.80
3.permenent marker 3.50 2.90 3.80
4.card indexing 14.70 15.00 16.00
Total price 30.60 30.50 32.00
GRAND TOTAL 81.50 82.00 82.15
 Food
14
12
10
Self Raising Flour
8
Sugar
6
Butter
4
2 Eggs

0
giant servay khidmat

Detergent
25

20

15 washing powder
dish washer
10
liquid bleach
5 tile cleaner

0
giant servay khidmat

Stationery
16
14
12
10 pencil
8 highlighter
6 permenant marker
4
card indexing
2
0
giant servay khidmat
45

40

35

30

25 giant
20 servay
khidmat
15

10

0
food detergent stationary

40

35

30

25
giant
20 servay

15 khidmat

10

0
food detergent stationary
Question (D)

Based on all the graph in question 1(C) , we can conclude that giant hypermarket
offers the lowest price for their customers. Then followed by servayl and Khidmat. This
is because the supplier of the giant gives the special price for it as it buy by bulk.
servay offer the normal price for their customer as it does not get special price from the
supplier. While, khidmat have to sold the items at the higher price because the shop buy
the items by bulk from Giant.

Other factors that influenced the prices of goods in the shops is such as the
location of the shop, the population of the customers, the status of the shop, the size of
the shop, and the rent for the shop.

Giant can offer the lowest price because it is situated at stratergic place so
indirectly this factor can attract customer buy at the mall. When there are many
customers, the demand of the items will be high and the mall can buy by bulk directly
with the supplier to get the special price. The status of the shop also influenced the
price of the goods sold. As example the shop with status mall will offer the lowest price
than the shop with status mini market. The size of the shop also will influenced the
price. When the size of the shop is bigger its mean it can sell many different items in the
shop. Indirectly the shop will known as one stop center and it will attract many
customers as the people nowadays are very busy. Giant is a bigmall and it provides
many items that we need in our life. Eventhough Giant have to pay rent for the place,
but it not gives too much effects to the price of goods sold as it has many buyers.

Servay and khidmat cannot offer the prices as giant because they are situated
outside the urban area like giant . So the population of the customer will not be as many
as customer in giant. These shops get the supply for their goods from giant. Even they
buy by bulk with giant but their prices still will be higher than giant. The size of these
shop also small and cannot provide too much goods for their customers. They just sold
basic needed for their customers. As they not have too much customers, so the rent
that they have to pay will influenced the price of the goods sold.
 n, there are many factors that affect the price of the goods solds in
As a conclusion,
a shop. So, we must be a smart customer to ensure we can get the lowest price. The
graph below will show the conclusion of the difference among the shops based upon
the shops grand total.

grand total

82.2
82.1
82
81.9
81.8
81.7 grand total
81.6
81.5
81.4
81.3
81.2
81.1
giant servay khidmat
 Question (e)

The item that has large price different among the shops is marker. Mydin Mall
sold it at RM 3.00, Si Comel sold it at RM3.90 while Embat Shop sold it at RM 3.60.

Calculate the mean


 =


.
=

= 20.20

Calculate the standard deviation

 =  
Or
 
= − )


  (.) 

= − ( )
 !

= 0.8498

The difference of the price of the marker in these three shops is maybe due to the
price given by the supplier to the shops. giant can sold it at lowest prices because the
demand of the buyers for the the item is high so it can buy by bulk with the supplier. So the
shop can get the special price. The demand of the item in servay and Khidmat are low. This
is because the customers are more interested to buy the stationery items in mall or
stationery shops as there are more options to choose. So servay and khidmat cannot buy by
bulk the stationery items with their supplier.
Part2
 Every year my school organises a carnival to raise funds for the school. This year
my school plans to install air conditioners in the school library. Last year, during the
carnival, my class made and sold butter cakes. Because of the popularity of butter
cakes, my class has decided to carry out the same project for this year’s carnival.

Question (a)

From the data in Part 1, I would go to Giant to purchase the ingredients for the butter
cakes. This is because giant offers the lowest price among the shops for the items I
want to buy. So my class will able to sold the butter cakes at the low price and get some
profits form the sale. Futhermore, giant is located not far from my school. So it is easier
to my friends and I to go there.

Ingredient Quantity Price in Price in Price index 2010 based 2009

per cake 2009 (Rm) 2010 (Rm)
Self-raising flour 250g 0.90 0.675
75

Sugar 200g 0.35 0.36

102.86

Butter 250g 3.30 3.60

109.10

Eggs(grade A) 5 (300g) 1.20 1.80

144
 (i) Calculate Price Index

"
 = × 100
1

" 0

Self raising-four
Butter

3.50
= × 100
1.00
= × 100
0.90 3.30
= 111.11 =106.06

Sugar
Eggs (Grade A)

= × 100
1.37
= × 100
0.36
0.35 1.25
=102.86 =109.60

(ii) Composite index

Ī = 

(×.)  (%×.&!)  (×!.!)  (!×.!)

=
%!

=107.74
 To calculate composite index firstly use the formula of composite index. Get
the value for the formula. Lets quantity per cake be as weightage, W. Obtain the
price index from the calculation in question (i). Then, calculate by using the
calculator.

(iii)

On 2009, RM 15.00
On 2010, suitable price is :


× 100 = 107.74%
15
 × 100 = 107.74 × 15
1616.10
 =
100
 = 16.20

Thus, the suitable price for the butter cake for the year 2010 is RM 16.20. The
increase in price is also suitable because of the rise in the price of the ingredients.
Question (c)

(i) To determine suitable capacity of air conditioner to be installed based on

volume/ size of a room

For common usage, air conditioner is rated according to horse power

(1HP), which is approximately 700W to 1000W of electrical power. It is
suitable for a room size 1000ft which is around 27m of volume. If we buy an
air conditioner with 3HP, it is suitable for a room around 81m.

(ii) Estimate the volume of school library

By using a measuring tape, the dimension for the library is:
Height=3.6m
Width=9.0m
Length=20.12m
Volume of the room=3.6 x 9.0 x 20.12
=651.90 m
One unit of air conditioner with 3HP is for 81 m
!.
For 651.90m = &

= 8.048
This means our school library needs 8 unit of air conditioner.

(iii) My class intends to sponsor one air conditioner for the school library. The
calculation below is to find how many butter cakes we must sell in order to
buy the air conditioner.

1 unit of 3 HP air conditioner = RM 1800

Cost for a cake = RM 6.23
Selling price = RM 16.20
Profit =RM 16.20- RM6.23
= RM 9.97

Number of cakes to buy 1 unit of air conditioner =

1800
= 180.54 = 181 cakes
9.97
 As a committee member for the carnival, I am required to prepare an estimated
budget to organise this year’s carnival. I has taken into consideration the increases
in expenditur from the previous year due to inflation The price of food, transportation
and tents has increased by 15%. The cost of games, prizes and decorations remains
the same,whereas the cost of miscellaneous items has increase by 30%.

(a) Table 3 has been completed based on the above information.

Expenditure Ammount in 2009 Amount in 2010 Index Weightage

(RM) (RM)
Food 1200 1.15 x 1200 =1380 115 12
Games 500 1 x 500 =500 100 5
Transportation 1300 1.15 x 1300 =345 115 3
Decoration 200 1 x 200 =200 100 2
Prizes 600 1 x 600 =600 100 6
Tonts 800 1.15 x800 =920 115 8
miscellaneous 400 1.3 x400 =520 130 4
Composite Index

Ī = 
() () ()() (!) (&) (%)
=
(!&%)
4465
= = 111.625
40

The total price for the year 2010 increase by 111.625%. This is because some price
in the year 2009 increased in the year 2010.

(a) The change in the composite index for the estimate budget for the carnival
from the year 2009 to the year 2010 is the same as the change from the
year
2010 to the year 2011. Below are the calculation to determine the
composite index of the budget for the year 2011 based on the year 2009.

Composite index for the year 2009 to the year 2010

=111.625
Composite index for the year 2010 to the year 2011
=111.625


I 
× 100 = I 
× I
  

1

I = 111.625 × 111.625 ×
 100

I 455 = 124.60
446
 Further Explorations
History of early price indices
No clear consensus has emerged on who created the first price index. The
earliest reported research in this area came from Welshman Rice Vaughan
who examined price level change in his 1675 book A Discourse of Coin and
Coinage. Vaughan wanted to separate the inflationary impact of the influx of
precious metals brought by Spain from the New World from the effect due
to currency debasement. Vaughan compared labor statutes from his own time
to similar statutes dating back to Edward III. These statutes set wages for
certain tasks and provided a good record of the change in wage levels.
Vaughan reasoned that the market for basic labor did not fluctuate much with
time and that a basic laborers salary would probably buy the same amount of
goods in different time periods, so that a laborer's salary acted as a basket of
goods. Vaughan's analysis indicated that price levels in England had risen six
to eightfold over the preceding century.[1]
While Vaughan can be considered a forerunner of price index research, his
analysis did not actually involve calculating an index.[1] In 1707
Englishman William Fleetwood created perhaps the first true price index. An
Oxford student asked Fleetwood to help show how prices had changed. The
student stood to lose his fellowship since a fifteenth century stipulation barred
students with annual incomes over five pounds from receiving a fellowship.
Fleetwood, who already had an interest in price change, had collected a large
amount of price data going back hundreds of years. Fleetwood proposed an
index consisting of averaged price relatives and used his methods to show
that the value of five pounds had changed greatly over the course of 260
years. He argued on behalf of the Oxford students and published his findings
anonymously in a volume entitled Chronicon Preciosum.[2]
Formal calculation
Further information: List of price index formulas

Given a set C of goods and services, the total market value of transactions
in C in some period t would be

where
represents the prevailing price of c in period t
represents the quantity of c sold in period t
If, across two periods t0 and tn, the same quantities of each good
or service were sold, but under different prices, then

and

would be a reasonable measure of the price of the set in one period relative to
that in the other, and would provide an index measuring relative prices overall,
weighted by quantities sold.
Of course, for any practical purpose, quantities purchased are rarely if ever
identical across any two periods. As such, this is not a very practical index
formula.
One might be tempted to modify the formula slightly to

This new index, however, doesn't do anything to distinguish growth or

reduction in quantities sold from price changes. To see that this is so, consider
what happens if all the prices double between t0and tn while quantities stay
the same: P will double. Now consider what happens if all
the quantities double between t0 and tn while all the prices stay the
same: P will double. In either case the change in P is identical. As such, P is
as much a quantity index as it is a price index.
Various indices have been constructed in an attempt to compensate for this
difficulty.
Paasche and Laspeyres price indices
The two most basic formulas used to calculate price indices are the Paasche
index (after the German economist Hermann Paasche [ˈpaːʃɛ]) and
the Laspeyres index (after the German economistEtienne
Laspeyres [lasˈpejres]).
The Paasche index is computed as

while the Laspeyres index is computed as

where P is the change in price level, t0 is the base period (usually the first
year), and tn the period for which the index is computed.
Note that the only difference in the formulas is that the former uses period n
quantities, whereas the latter uses base period (period 0) quantities.
When applied to bundles of individual consumers, a Laspeyres index of 1
would state that an agent in the current period can afford to buy the same
bundle as he consumed in the previous period, given that income has not
changed; a Paasche index of 1 would state that an agent could have
consumed the same bundle in the base period as she is consuming in the
current period, given that income has not changed.
Hence, one may think of the Laspeyres index as one where the numeraire is
the bundle of goods using base year prices but current quantities. Similarly,
the Paasche index can be thought of as a price index taking the bundle of
goods using current prices and current quantities as the numeraire.
The Laspeyres index systematically overstates inflation, while the Paasche
index understates it, because the indices do not account for the fact that
consumers typically react to price changes by changing the quantities that
they buy. For example, if prices go up for good c then, ceteris paribus,
quantities of that good should go down.
Fisher index and Marshall-Edgeworth index
A third index, the Marshall-Edgeworth index (named for economists Alfred
Marshall and Francis Ysidro Edgeworth), tries to overcome these problems of
under- and overstatement by using the arithmethic means of the quantities:
A fourth, the Fisher index (after the American economist Irving Fisher), is
calculated as the geometric mean of PP and PL:

Fisher's index is also known as the “ideal” price index.

However, there is no guarantee with either the Marshall-Edgeworth index or
the Fisher index that the overstatement and understatement will thus exactly
one cancel the other.
While these indices were introduced to provide overall measurement of
relative prices, there is ultimately no way of measuring the imperfections of
any of these indices (Paasche, Laspeyres, Fisher, or Marshall-Edgeworth)
against reality.

Normalizing index numbers

Price indices are represented as index numbers, number values that indicate relative change but not
absolute values (i.e. one price index value can be compared to another or a base, but the number
alone has no meaning). Price indices generally select a base year and make that index value equal to
100. You then express every other year as a percentage of that base year. In our example above,
let's take 2000 as our base year. The value of our index will be 100. The price

 2000: original index value was $2.50; $2.50/$2.50 = 100%, so our new index value is 100
 2001: original index value was $2.60; $2.60/$2.50 = 104%, so our new index value is 104
 2002: original index value was $2.70; $2.70/$2.50 = 108%, so our new index value is 108
 2003: original index value was $2.80; $2.80/$2.50 = 112%, so our new index value is 112

When an index has been normalized in this manner, the meaning of the number 108, for instance, is
that the total cost for the basket of goods is 4% more in 2001, 8% more in 2002 and 12% more in
2003 than in the base year (in this case, year 2000).
Relative ease of calculating the Laspeyres index

As can be seen from the definitions above, if one already has price and quantity data (or,
alternatively, price and expenditure data) for the base period, then calculating the Laspeyres index for
a new period requires only new price data. In contrast, calculating many other indices (e.g., the
Paasche index) for a new period requires both new price data and new quantity data (or, alternatively,
both new price data and new expenditure data) for each new period. Collecting only new price data is
often easier than collecting both
th new price data and new quantity data, so calculating the Laspeyres
index for a new period tends to require less time and effort than calculating these other indices for a
[3]
new period.
Calculating indices from expenditure data

Sometimes, especially for aggregate data, expenditure data is more readily available than quantity
[4]
data. For these cases, we can formulate the indices in terms of relative prices and base year
expenditures, rather than quantities.

Here is a reformulation for the Laspeyres index:

Let be the total expenditure on good c in the base period, then (by definition) we

have and therefore also . We can substitute these values

into our Laspeyres formula as follows:

A similar transformation can be made for any index.

Chained vs non-chained
chained calculations
So far, in our discussion, we have always had our price indices relative to some fixed base period. An
alternative is to take the base period for each time period to be the immediately preceding time
period. This can be done with any of the above indices, but here's an example with the Laspeyres
index, where tn is the period for which we wish to calculate the index and t0 is a reference period that
anchors the value of the series:

Each term

answers the question "by what factor have prices increased between period tn − 1 and period tn".
When you multiply these all together, you get the answer to the question "by what factor have prices
increased since period t0.

Nonetheless, note that, when chain indices are in use, the numbers cannot be said to be "in period t0"
prices.
Index number theory
Price index formulas can be evaluated in terms of their mathematical
properties per se.. Several different tests of such properties have been
proposed in index number theory literature. W.E. Diewert summarized past
research in a list of nine such tests for a price index ,
where P0 and Pn are vectors giving prices for a base period and a reference
period while and give quantities for these periods.[5]
1. Identity test:

The identity test basically means that if prices remain the same and
quantities remain in the same proportion to each other (each quantity of
an item is multiplied by the same factor of either α, for the first period,
or β, for the later period) then the index value will be one.
2. Proportionality test:

If each price
e in the original period increases by a factor α then the index
should increase by the factor α.
3. Invariance to changes in scale test:

The price index should not change if the prices in both periods are
increased by a factor and the quantities in both per
periods
iods are increased
by another factor. In other words, the magnitude of the values of
quantities and prices should not affect the price index.
4. Commensurability test:
The index should not be affected by the choice of units used to measure
prices and quantities.
es.
5. Symmetric treatment of time (or, in parity measures, symmetric
treatment of place):

Reversing the order of the time periods should produce a reciprocal

index value. If the index is calculated from the most recent time period
to the earlier time perio
period,
d, it should be the reciprocal of the index found
going from the earlier period to the more recent.
6. Symmetric treatment of commodities:
All commodities should have a symmetric effect on the index.
Different permutations of the same set of vectors should not change the
index.
7. Monotonicity test:

A price index for lower later prices should be lower than a price index
with higher later period prices.
8. Mean value test:
The overall price relative implied by the price index should be between
the smallest and largest price relatives for all commodities.
9. Circularity test:

Given three ordered periods tm, tn, tr, the price index for
periods tm and tn times the price index for periods tn and tr should be
equivalent to the price index for periods tm and tr.
Quality change
Price indices often capture changes in price and quantities for goods and services, but they often fail
to account for improvements (or often deteriorations) in the quality of goods and services. Statistical
agencies generally use matched-model price indices, where one model of a particular good is priced
at the same store at regular time intervals. The matched-model method becomes problematic when
statistical agencies try to use this method on goods and services with rapid turnover in quality
features. For instance, computers rapidly improve and a specific model may quickly become obsolete.
Statisticians constructing matched-model price indices must decide how to compare the price of the
obsolete item originally used in the index with the new and improved item that replaces it. Statistical
[6]
agencies use several different methods to make such price comparisons.

The problem discussed above can be represented as attempting to bridge the gap between the price
for the old item in time t, P(M)t, with the price of the new item in the later time period,P( )t + 1.[7]

 The overlap method uses prices collected for both items in both time periods, t and t+1. The price
relative P(N)t + 1/P(N)t is used.

 The direct comparison method assumes that the difference in the price of the two items is not due
to quality change, so the entire price difference is used in the index. P(N)t + 1/P(M)t is used as the
price relative.
 The link-to-show-no-change assumes the opposite of the direct comparison method; it assumes
that the entire difference between the two items is due to the change in quality. The price relative
[8]
based on link-to-show-no-change is 1.
 The deletion method simply leaves the price relative for the changing item out of the price index.
This is equivalent to using the average of other price relatives in the index as the price relative for
the changing item. Similarly, class mean imputation uses the average price relative for items with
[9]
similar characteristics (physical, geographic, economic, etc.) to M and N.
After spending countless hours,days and night to finish this project and
also sacrificing my time for chatting and movies in this mid year
holiday,there are several things that I can say...

Additional Mathematics...
From the day I born...
From the day I was able to holding pencil...
From the day I start learning...
And...
From the day I heard your name...

I always thought that you will be my greatest obstacle and rival in

excelling in my life...
But after countless of hours...
Countless of days...
Countless of nights...

After sacrificing my precious time just for you...

Sacrificing my play Time..
Sacrificing my Chatting...
Sacrificing my Facebook...
Sacrificing my internet...
Sacrifing my Anime...
Sacrificing my Movies...
I realized something really important in you...

I really love you...

You are my real friend...
You my partner...
You are my soulmate...

I LOVE ADDITIONAL MATHEMATICS…..