Rahul buys 90 kg of sugar and 5 pairs of shoes in a year. In the year 2000, the price of a kg of sugar was Rs. 10 and a pair of shoes was Rs. 100. Now suppose the prices of a kg of sugar and a pair of shoes have gone up to Rs. 15 and Rs. 120 in the year 2005. What is the Consumer Price Index?

139.29

The correct answer is Option (4) → 139.29

Consumer Price Index (CPI):  This is the index of prices of a given basket of commodities which are bought by the representative consumer. CPI is generally expressed in percentage terms. We have two years under consideration – one is the base year, the other is the current year. We calculate the cost of purchase of a given basket of commodities in the base year. We also calculate the cost of purchase of the same basket in the current year. Then we express the latter as a percentage of the former. This gives us the Consumer Price Index of the current year vis-´a-vis the base year. 

• Base Year (2000):

  • Sugar: 90 kg × ₹10 = ₹900

  • Shoes: 5 pairs × ₹100 = ₹500

  • Total base year cost = ₹900 + ₹500 = ₹1400

• Current Year (2005):

  • Sugar: 90 kg × ₹15 = ₹1350

  • Shoes: 5 pairs × ₹120 = ₹600

  • Total current year cost = ₹1350 + ₹600 = ₹1950 

CPI= [(Total cost in current year) / (Total cost in base year)] * 100

     = (1950 / 1400) * 100 = 139.29