Most index numbers are subjected to revision from time to time due to different reasons. In most cases it becomes compulsory to change the base year because numerous changes took place with the passage of time. For example changes may happen due to disappearance of old items, inclusion of new ones, changes in weights of commodities or changes in conditions, habits, and standard of life etc.
Shifting from one fixed base to another fixed base
To convert a fixed base to a new fixed base each old index is divided by the index of new base sought multiplied by 100. It can be illustrated with the help of following problem.
Problem: Following series is given to the base year 1995. Now convert it into the new series with base year 1998.
Shifting from chain base to fixed base
One of the disadvantages of chain base method is that the comparison between distant periods is not immediately evident. Therefore it becomes necessary to convert chain base indices into fixed base indices. This can be illustrated with the help of following problem.
Problem: Convert the following chain indexes into the new series with base year 1970.
Shifting from Fixed to chain base
As discussed earlier, conditions change over a period due to revised weightings system, inclusion of new items and disappearance of old ones etc. Due to all these factors, sometimes it is necessary to convert the indices from fixed base to chain base. This can be explained with the help of following problem.
Problem: Convert the following indexes with base 1980 to chain indexes.