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Index Numbers

Question

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An enquiry into the budgets of the middle class families in a certain city gave the following information.

Expenses on Item

Food 35%

Fuel 10%

Clothing 20%

Rent 15%

Misc. 20%

Price (in Rs.) in 2004

1500

250

750

300

400

Price (in Rs.) in 1995

1400

200

500

200

250

What is the cost of living index of 2004 as compared with 1995?

Solution

Item	Expenses in Percentage	Price in Rs. in 1995	Price in Rs. in 2004 (P₁)		WR
Food	35	1400	1500	107.14	3750
Fuel	10	200	250	125.00	1250
Clothing	20	500	750	150.00	3000
Rent	15	200	300	150.00	2250
Misce	20	250	400	160.00	3200
	ΣW = 100				ΣWR = 13450

Cost of living Index

Some More Questions From Index Numbers Chapter

The item having the highest weight in consumer price index for industrial workers is:

In general, inflation is calculated by using:

The item having the highest weight in consumer’s price index for industrial workers is:

consumer price index measures changes in:

The wholesale price index.

D.A. paid to the workers is based on:

Why do we need an index number?

Why is it essential to have different CPIs for different categories of consumers?

What does a consumer price index for industrial workers measure?

What is the difference between a price index and a quantity index?

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