CMA Foundation · Fundamentals of Business Mathematics and Statistics · Index Numbers and Time Series
The consumer price index for a city rose from 200 in the base year to 250 in the current year. A worker's wage in the base year was Rs 20,000. What current wage keeps the real wage unchanged?
The wage must be Rs 25,000. Prices rose by a factor of 250/200, which is 1.25, so to keep purchasing power unchanged the base wage of Rs 20,000 must be multiplied by 1.25, giving Rs 25,000.
- ARs 22,500
- BRs 25,000Correct
- CRs 24,000
- DRs 40,000
Explanation
Required wage = 20,000 x 250/200 = 20,000 x 1.25 = Rs 25,000. Real wage = 25,000 x 200/250 = Rs 20,000, confirming the result. Rs 22,500 is wrong because it adds only 12.5 percent.
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