CA Foundation · Quantitative Aptitude · Index Numbers
For a working-class family, the total expenditure on a fixed basket of goods at base-year prices is ₹8,000, and the cost of the same basket at current-year prices is ₹10,400. Using the aggregative expenditure method, what is the cost of living index for the current year?
The cost of living index is 130. Dividing the current cost of the fixed basket, ₹10,400, by its base-year cost, ₹8,000, gives 1.30, and multiplying by 100 gives 130. This means living costs are 30% higher than in the base year.
- A130Correct
- B76.9
- C80
- D104
Explanation
Under the aggregative expenditure method, index = (Σp1q0 / Σp0q0) × 100 = (10,400 / 8,000) × 100 = 130. The value 76.9 comes from inverting the ratio (8,000/10,400 × 100), which is a mistake.
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