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Question
Calculate the cost of living index by aggregate expenditure method:
| Commodity | Weight 2010 |
Price (Rs.) | |
| 2010 | 2015 | ||
| P | 80 | 22 | 25 |
| Q | 30 | 30 | 45 |
| R | 25 | 42 | 50 |
| S | 40 | 25 | 35 |
| T | 50 | 36 | 52 |
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Solution
| Commodity | Price (Rs.) | Weights (V) |
P = `"p"_1/"p"_0 xx 100` | PV | |
| 2010 (p0) |
2015 (p1) |
||||
| P | 22 | 25 | 80 | 113.63 | 9090.4 |
| Q | 30 | 45 | 30 | 150 | 4500 |
| R | 42 | 50 | 25 | 119.05 | 2976.25 |
| S | 25 | 35 | 40 | 140 | 5600 |
| T | 36 | 52 | 50 | 144.44 | 7222 |
| Total | `sum"V"` = 225 | `sum"PV"` = 29388.65 | |||
Cost of living index number = `(sum"PV")/(sum"V")`
= `29388.65/225`
= 130.62
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RELATED QUESTIONS
______ : Base year prices :: P1 : Current year prices.
State with reason whether you agree or disagree with the following statement:
Index numbers measure changes in the price level only.
Index number was originally developed to measure ______.
Explain Paasche’s price index number
State the test of adequacy of index number
Calculate by a suitable method, the index number of price from the following data:
| Commodity | 2002 | 2012 | ||
| Price | Quantity | Price | Quantity | |
| A | 10 | 20 | 16 | 10 |
| B | 12 | 34 | 18 | 42 |
| C | 15 | 30 | 20 | 26 |
Calculate price index number for 2005 by (a) Laspeyre’s (b) Paasche’s method
| Commodity | 1995 | 2005 | ||
| Price | Quantity | Price | Quantity | |
| A | 5 | 60 | 15 | 70 |
| B | 4 | 20 | 8 | 35 |
| C | 3 | 15 | 6 | 20 |
Choose the correct alternative:
While computing a weighted index, the current period quantities are used in the:
Assertion and reasoning question:
- Assertion (A): The index number considers all factors.
- Reasoning (R): The index number is based on samples.
Explain the meaning of index number.
