CMA Foundation · Fundamentals of Business Mathematics and Statistics · Index Numbers and Time Series
A company's employee earned ₹24,000 per month when the cost of living index was 120. The index has now risen to 180. By how much must the money wage rise so that the real wage stays unchanged?
The wage must rise by ₹12,000. To keep the real wage constant, the new wage is 24,000 times 180 divided by 120, which equals ₹36,000. The increase over the existing ₹24,000 is therefore ₹12,000.
- A₹12,000Correct
- B₹36,000
- C₹6,000
- D₹16,000
Explanation
Required wage = 24,000 × 180/120 = ₹36,000. Increase = 36,000 − 24,000 = ₹12,000. Check: 24,000/120 = 200 and 36,000/180 = 200, so real wage is the same. ₹36,000 is the new wage, not the rise.
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