Question1
(i) simple Aggregative price Index
(ii) Index of Average of price Relatives
Items  A  B  C  D  E 
Prices Rs. (1997)  6  2  4  10  8 
Prices Rs. (1998)  10  2  6  12  12 
Prices Rs. (1999)  15  3  8  14  16 
Solution:
Items 

A B C D E 
6 2 4 10 8 
10 2 6 12 12 
15 3 8 14 16 
166.67 100.00 150.00 120.00 150.00 
250 150 200 140 200 
Simple Aggregative Price Index :
Index of Average of Price Relatives :
Question2
Commodity  A  B  C  D 
Prices in 1990 (Rs.)  60  45  80  25 
Prices in 1995 (Rs.)  75  50  70  40 
Solution:
Commodity 

A B C D 
60 45 80 25 
75 50 70 40 
125 111.11 87.50 16.00 
Question3
Year  1984  1985  1986  1987  1988  1989 
Prices  80  90  100  110  140  160 
Solution:
Commodity 

A B C D E 
10 25 30 15 20 
6 10 15 20 8 
15 40 45 30 25 
8 20 12 15 6 
60 250 450 300 160 
90 400 675 600 200 
80 500 360 225 120 
120 800 540 450 150 
Laspeyre's Price Index :
Question4
(i) Laspeyre's method and (ii) paasche's method
Base Period 
Current Period 

Price  Quantity  Price  Quantity  
A  2  10  4  5 
B  5  12  6  10 
C  4  20  5  15 
D  2  15  3  10 
Solution:
Commodity 








A B C D 
2 5 4 2 
10 12 20 15 
4 6 5 3 
5 10 15 10 
20 60 80 30 
40 72 100 45 
10 50 60 20 
20 60 75 30 




Question5
Commodity  Base Year  Current Period  
Price  Quantity  Price  Quantity  
A  10  30  12  50 
B  8  15  10  25 
C  6  20  6  30 
D  4  10  6  20 
Solution:
Commodity 

A B C D 
10 8 6 4 
30 15 20 10 
12 10 6 6 
50 25 30 20 
500 200 180 80

600 250 180 120 
.
Question6
Commodity  1970  1990  
Price  Expenditure  Price  Expenditure  
A  8  100  10  90 
B  10  60  11  66 
C  5  100  5  100 
D  3  30  2  24 
E  2  8  4  20 
Solution:
Since we are given the expenditure and price, we can obtain the quantity by dividing expenditure by the price for each commodity.
Commodity 

A B C D E 
8 10 5 3 2 
12.50 6.0 20.0 10.0 4.0 
10 11 5 2 4 
9 6 20 12 5 
100 60 100 30 8 
125 66 100 20 16 
72 60 100 36 10 
90 66 100 24 20 
Question7
Items  Weight in % (Rs.)  Base Year Price (Rs.)  Current Year Price (Rs.) 
A  40  2  4 
B  30  5  6 
C  20  4  5 
D  10  2  3 
Solution:
Items 
W 
RW 

A
B
C
D 
40
30
20
10 
2
5
4
2 
4
6
5
3 
8000
3600
2500
1500 

Question8
Items  Price in 1980  Price in 2005 
Food  100  200 
Clothing  20  25 
Fuel and Lighting  15  20 
House Rent  30  40 
Misc.  35  65 
Solution:
Item 
W 
RW 

Food Clothing Fuel and Lighting House Rent Misc. 
75 10 5
6 4 
100 20 15
30 35 
200 25 20
40 65 
200 125 133.33
133.33 185.71 
15000 1250 666.65
799.98 742.84 
Question9
Expenses on Items 
Food 35% 
Fuel 10% 
Clothing 20% 
Rent 15% 
Misc. 20% 
Prices in 2004 (Rs.) 
1500 
250 
750 
300 
400 
Prices in 1995 (Rs.) 
1400 
200 
500 
200 
250 
Solution:
Items 
W in % 
(1995) 
(2004) 
RW 

Food Fuel Clothing Rent Misc : 
35 10 20 15 20 
1400 200 500 200 250 
1500 250 750 300 400 
107.14 125.00 150.00 150.00 160.00 
3750 1250 3000 2250 3200 
CPI =
This result indicates that the CPI in the current year has increased by 34.5 per cent as compared to the base period.
Question10
Commodities 
Wheat 
Rice 
Pulses 
Ghee 
Sugar 
Oil 
Fuel 
Clothes 
Units consumed in base year 
200 
50 
56 
20 
40 
50 
60 
40 
Price Rs. (In base year) 
1.0 
3.0 
4.0 
20.0 
2.5 
10.0 
2.0 
15.0 
Price Rs. (In current year) 
1.2 
3.5 
5.0 
30.0 
5.0 
15.5 
2.5 
18.0 
Solution:
Commodities 
W= 
RW 

Wheat Rice Pulses Ghee Sugar Oil Fuel Clothes 
200 50 56 20 40 50 60 40 
1.0 3.0 4.0 20.0 2.5 10.0 2.0 15.0 
1.2 3.5 5.0 30.0 5.0 15.5 2.5 18.0 
120.00 116.67 125.00 150.00 200.00 155.00 125.00 120.00 
200 150 224 400 100 500 120 600 
24000 17500.5 28000 60000 20000 77500 15000 72000 
CPI =
This result indicates that CPI in the current year has increased by 36.88 as compared to the base period.
Question11
Solution:
Salary required in the current year to maintain the same standard of living of base year
Current year salary = Rs. 16,000
The increase in current salary required = 160006000=Rs.10,000.
Question12
Solution:
There are two situations in the given conditions. Let be the index for the first item and be the index for the second item.
First Situation : â€¦(i)
Second situation : â€¦(ii)
From (i) , â€¦(iii)
From (ii)m
Solving (iii) and (iv), we get â€¦(iv)
Question13
Year 
199596 
199697 
199798 
199899 
19992000 
200001 
200102 
200203 
WPI (199394) 
121.6 
127.2 
132.8 
140.7 
145.7 
155.7 
161.3 
166.8 
Solution:
Inflation rate for different years are calculated as :
There are many ups and down in the WPI.
Question14
Year 
200001 
200102 
200203 
200304 
CPI for IW (1992=100) 
444 
463 
482 
500 
Solution:
Inflation rate for different years are calculated as :
CPI of industrial workers declined in all the years
Question15
Solution:
An index number is a statistical device for measuring relative change in the prices of a group of related variables over two or more different times. In other words, an index number is defined as specialised type of average which measure changes in the prices of commodities, industrial production, cost of living index etc.
Question16
Solution:
The base year is the reference year with which the current year is compared. If we measure the changes in prices in 2004 relative to those in 2001, then 2001 is called the base year.
Question17
Solution:
Some widely used index numbers are :
(i) Consumer Price Index (CPI)
(ii) The Wholesale Price Index (WPI)
(iii) Index of Industrial Production (IIP) and
(iv) Sensex etc.
Question18
Solution:
In simple (unweighted) index number, all items are treated as having equal importance whereas in weighted index number, relative importance of items is taken care of. Here weights given are quantity weights or value weights.
Question19
Solution:
A consumer price index measures changes in the retail price paid by the ultimate consumers for a specified basket of goods and services over two different time periods.
Question20
Solution:
The wholesale price index measures changes in the wholesale prices of a group of commodities traded in wholesale market over two different time periods. In other words, it indicates the change in the general price level.
Question21
Solution:
Index of industrial production is a quantity index. It measures changes in the level of industrial production comprising many industries. This index has been constructed in india annually with base period 1993  1994 for the current series.
Question22
Solution:
Cost of living Index and W = proportion or percentage of expenditure on the items in the total expenditure during the base period.
Question23
Solution:
Simple Aggregative Price Index
Question24
Solution:
Index of simple Average of Price Relative
Question25
Solution:
(Base year quantities as weights)
Question26
Solution:
(Current year quantities as weights)
Question27
Solution:
(Weighted average of price relative index)
Question28
Solution:
It is a weighted average of quantity relatives.
Question29
Solution:
A consumer price index for industrial workers measures general inflation.
Question30
Solution:
A price index measures changes in prices of goods whereas a quantity index measures changes in the volume (or quantity) of goods produced.
Question31
Solution:
It is essential to have different CPI for different categories of consumers as the cost of living of different categories of consumers differ.
Question32
Solution:
The CPI for urban nonmanual employees do not represent the changes in the cost of living of the president of India.
Question33
Solution:
Consumer price index numbers are having three types :
(i) The industrial workers,
(ii) The urban nonmanual workers and
(iii) The agricultural labourers.
Question34
Solution:
Index number of agricultural production is a weighted average of quantity relatives. It measures changes in the level of agricultural production of food grains and nonfood grains items. Food grains have a weight of 69.52 percent in this index.
Question35
Solution:
Sensex is the short form of Bombay Stock Exchange Sensitive Index with 197879 as base. It is a useful guide for the investors in the stock market. It deals with 30 stocks represented by 13 sectors of the economy. If the sensex rises, it indicates that the market is doing well and investors expect better earnings on their investments.
Question36
Solution:
Price Index number does not reflect any type of changes in prices.
Question37
Solution:
Wholesale Price Index (WPI) is used to calculate inflation rate.
Question38
Solution:
Inflation rate
Where, X_{t} refers to WPI for the (t)^{th} week.
X_{t} refers to WPI for the (t  1)^{th} week.
Question39
Solution:
The base year of the new series of wholesale price index numbers published by the Government of India is19931994
Question40
Solution:
Consumer Price Index (CPI)
Question41
Solution:
Purchasing power of one rupee =
Question42
Solution:
Real wages =
Question43
Solution:
Real wages =