State with reasons whether you agree or disagree with the statement : There are no limitations to the Index numbers.

Answer: I disagree with the statement.

Index numbers are useful, but they have several limitations:

1. Approximate indicators: They show only approximate changes, not exact changes.
2. Based on samples: They are based on a sample of items, which may not represent all goods.
3. Misuse: They can be manipulated by selecting a convenient base year, items or method.
4. Changes in quality and tastes: They do not consider changes in quality of goods or in consumers’ tastes and habits over time.
5. Difficulty in choice of base year and weights: Choosing a normal base year and suitable weights is difficult.
6. Limited use: An index made for one purpose cannot be used for another, and international comparisons are difficult.