Calculate index numbers from the following data by simple aggregate method taking prices of 1995 as base period.
|
Commodity |
Year |
A |
B |
C |
D |
|
Price (in Rupees/unit) |
1995 |
80 |
50 |
90 |
30 |
|
2005 |
95 |
60 |
100 |
45 |
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → 120
To calculate the price index number using the simple aggregate method, we use the following formula:
$P_{01}=\frac{∑P_1}{∑P_0}×100$
Where:
- $∑P_0$ is the sum of prices in the base year (1995).
- $∑P_1$ is the sum of prices in the current year (2005).
Calculation of Sums
|
Commodity |
Price in 1995 ($P_0$) |
Price in 2005 ($P_1$) |
|
A |
80 |
95 |
|
B |
50 |
60 |
|
C |
90 |
100 |
|
D |
30 |
45 |
|
Total |
$∑P_0=250$ |
$∑P_1=300$ |
Calculation of Index Number
Substituting the values into the formula:
$P_{01}=\frac{250}{300}×100$
$P_{01}=1.2×100$
$P_{01}=120$
The price index number for the year 2005, taking 1995 as the base year, is 120. This indicates a 20% increase in the aggregate price level from 1995 to 2005.