State with reasons whether you agree or disagree with the following statement (any three): Index number can be constructed without the base year.

Answer: I disagree with the statement.

Reasons:

1. Base year is the reference: An index number compares changes in a variable with a base year whose value is taken as 100.
2. Formula needs base values: \(P_{01} = \dfrac{\sum P_1}{\sum P_0}\times 100\) requires base-year prices \(P_0\); without them it cannot be calculated.
3. Choice of base year: The base year must be a normal year, free from abnormal events like war, famine or floods.
4. Relative measure: Index numbers are relative measures; there is nothing to compare without a base.

Hence an index number cannot be constructed without a base year.