CA Foundation · Quantitative Aptitude · Index Numbers
For a formula, the price index for 2024 with base 2022 is 125. If the formula satisfies the time reversal test, what is the price index for 2022 with base 2024?
The index is 80. If the formula satisfies the time reversal test, the reverse index is the reciprocal of the forward index. With P01 = 1.25, P10 = 1/1.25 = 0.80, which is 80 on a base of 100. Subtracting 25 from 100 would be incorrect.
- A125
- B75
- C80Correct
- D100
Explanation
Under time reversal P01 × P10 = 1. P01 = 125/100 = 1.25, so P10 = 1/1.25 = 0.80, i.e. an index of 80. The figure 75 arises from wrongly using 100 − 25.
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