When index numbers for a number of years are computed serially on the basis of a fixed base year’s data, it is a case of fixed base index numbers.
Such index numbers are otherwise called the price relatives. The base year thus fixed may be the remote most past year, any middle year, any recent past year, average of some years, or average of all the years given. The formula for computing such an index number is PR1 = (P1/P1) x 100
Where, PR1 = Price relative of the current year
P1 = Price of the current year.
P0 = Price of the fixed base year.
Such an index number can also be easily converted into a chain base index number by the following formula:
LR1 = (PR1/PR0) x 100
Where, LR1 = Link relative, or the chain base index number of the current year.
PR1 = Price relative, or the fixed base index number of the current year.
PR0 = Price relative, or the fixed base index number of the immediately preceding year.