Index constructed for a group of variables is called as composite index.

Index constructed for a group of related items such as Steel, Bricks, Cement, Sand, Wood etc related to construction activity is termed as composite index. Wholesale price index, index of crime rate, index of cost of education are a few examples. Index number constructed taking the weights and index numbers of a group of related items is called as Composite index number. Cost of living index numbers are constructed considering the index numbers of food, clothing, rent, fuel, lighting etc. and their weights. It can be calculated by using the following formula. Composite index number/Cost of living index number = sigma(IW)/sigma W I denotes the price index numbers of related items W denotes the weights assigned For ex. Group Index(I) Weight(W) IW Food --- 250 -------- 50%-----12500 Clothing 300 ------- 20%----- 6000 Miscella neous --- 350--------30%-----10500 SigmaW = Total of weights = 100 sigmaIW = 29000 Cost of living index number = 29000/100 = 290 This indicates that there is 290 - 100 = 190% increase in the prices of related items consumed by the specific group of consumers in the current year.

A number of formulae or methods are used for the construction of composite indexIndex constructed for a group of variables is called as composite index. Index constructed for a group of related items such as Steel, Bricks, Cement, Sand, Wood etc related to construction activity is termed as composite index. Wholesale price index, index of crime rate, index of cost of education are a few examples.

Index number constructed taking the weights and index numbers of a group of related items is called as Composite index number. Cost of living index numbers are constructed considering the index numbers of food, clothing, rent, fuel, lighting etc. and their weights. It can be calculated by using the following formula. Composite index number/Cost of living index number = sigma(IW)/sigma W I denotes the price index numbers of related items W denotes the weights assigned For ex. Group Index(I) Weight(W) IW Food --- 250 -------- 50%-----12500 Clothing 300 ------- 20%----- 6000 Miscella neous --- 350--------30%-----10500 SigmaW = Total of weights = 100 sigmaIW = 29000 Cost of living index number = 29000/100 = 290 This indicates that there is 290 - 100 = 190% increase in the prices of related items consumed by the specific group of consumers in the current year.

A number of formulae or methods are used for the construction of composite index