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Question
An Enquiry was made into the budgets of the middle class families in a city gave the following information.
| Expenditure | Food | Rent | Clothing | Fuel | Rice |
| Price(2010) | 150 | 50 | 100 | 20 | 60 |
| Price(2011) | 174 | 60 | 125 | 25 | 90 |
| Weights | 35 | 15 | 20 | 10 | 20 |
What changes in the cost of living have taken place in the middle class families of a city?
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Solution
| Expenditure | Base Year Price 2010 (p0) |
Current Year Price 2011 (p1) |
Weight (W) |
P = `"p"_1/"p"_0 xx 100`PW | PW |
| Food | 150 | 174 | 35 | 116 | 4060 |
| Rent | 50 | 60 | 15 | 120 | 1800 |
| Clothing | 100 | 125 | 20 | 125 | 2500 |
| Fuel | 20 | 25 | 10 | 125 | 1250 |
| Rice | 60 | 90 | 20 | 150 | 3000 |
| Total | 100 | 12610 | |||
Cost of living index number = `(sum"PW")/(sum"W")`
= `12610/100`
= 126.1
For the middle-class families of the city, the cost of living has increased up to 26.1 % in 2011 as compared to 2010.
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