Read the passage carefully and answer the questions based on the passage:
Macroeconomic Variables
In an economy where two goods, wheat and cloth, are produced. A representative consumer buys 90 kg of wheat and 5 pieces of cloth in a year. Suppose in the year 2022 the price of a kg of wheat was Rs. 10 and a piece of cloth was Rs. 100. The prices of a kg of wheat and a piece of cloth went up to Rs. 15 and Rs. 120 respectively in the year 2025. It is worth noting that many commodities have two sets of prices. One is the retail price which the consumer actually pays. The other is the wholesale price, the price at which goods are traded in bulk. These two may differ in value because of the margin kept by traders.
What is Consumer Price Index?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 139.29 (approximately)
| Commodity | Quantity | Price (2022) | Price (2025) |
|---|---|---|---|
| Wheat | 90 kg | Rs. 10 | Rs. 15 |
| Cloth | 5 pieces | Rs. 100 | Rs. 120 |
Step 1: Calculate expenditure in the base year (2022)
Wheat = 90 × 10 = 900
Cloth = 5 × 100 = 500
Total (Base year) = 1400
Step 2: Calculate expenditure in the current year (2025)
Wheat = 90 × 15 = 1350
Cloth = 5 × 120 = 600
Total (Current year) = 1950
Step 3: Calculate Consumer Price Index (CPI)
CPI=[Total expenditure in current year / Total expenditure in current year] * 100
= [1950/1400]*100 = 139.29