CONSTRUCTING RANK PRICE INDEX NUMBER: AN APPLICATION TO RESIDENTIAL RENT

Abstract

Index numbers are often constructed for continuous variables such as price, weight, volume and quantity of goods, but rarely for nominal or ordinal categorical responses. Here, we constructed index number for ordinal categorical variables, called Jibasen-Gazali-Asanya rank price index (P^RG). The proposed method was applied to rent data of residential houses of different categories in Jimeta metropolis from 2000 - 2015.The method takes into cognizance expenditure and type of the property, as weights, the rent was considered as price. The results were compared with existing index methods such as Weighted Dutot Index method, Weighted Carli Index method and Weighted Jevons index method. The coefficient of variation (C.V.) for the distribution of price indices was also obtained with respect to each index method. The result shows that the proposed Index performed relatively well alongside existing index methods, since indices obtained from the proposed rank index is bounded by indices computed from weighted Dutot's price index, weighted Jevan's and the weighted Carli's price index.