Answer the following (any three): Explain any four limitations of index number.

Answer: Limitations of index numbers:

1. Based on samples: Index numbers are based on a sample of items, so they may not represent all items correctly.
2. Choice of base year: If an abnormal base year is chosen, the results are misleading.
3. Changes in quality and tastes: Quality of goods and consumer preferences change over time, which index numbers cannot fully reflect.
4. Arbitrary weights: Weights assigned to items may be arbitrary or biased.
5. Approximate indicators: Index numbers show only approximate (average) changes, not exact changes.
6. Not suitable for all purposes: An index made for one purpose cannot be used for another; international comparisons are difficult.
7. Possibility of manipulation: They can be misused to support a particular view.