<P> While these indices were introduced to provide overall measurement of relative prices, ultimately no method measures the imperfections of any of these indices (Paasche, Laspeyres, Fisher, or Marshall--Edgeworth) against reality . </P> <P> Price indices are represented as index numbers, number values that indicate relative change but not absolute values (i.e. one price index value can be compared to another or a base, but the number alone has no meaning). Price indices generally select a base year and make that index value equal to 100 . Every other year is expressed as a percentage of that base year . In this example, let 2000 be the base year: </P> <Ul> <Li> 2000: original index value was $2.50; $2.50 / $2.50 = 100%, so new index value is 100 </Li> <Li> 2001: original index value was $2.60; $2.60 / $2.50 = 104%, so new index value is 104 </Li> <Li> 2002: original index value was $2.70; $2.70 / $2.50 = 108%, so new index value is 108 </Li> <Li> 2003: original index value was $2.80; $2.80 / $2.50 = 112%, so new index value is 112 </Li> </Ul> <Li> 2000: original index value was $2.50; $2.50 / $2.50 = 100%, so new index value is 100 </Li>

In index number of which year price is assumed to be 100