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CMA Foundation · Fundamentals of Business Mathematics and Statistics · Index Numbers and Time Series

The prices of three items in the base year and the current year are: Rice Rs 40 to Rs 50, Oil Rs 100 to Rs 130, Sugar Rs 20 to Rs 30. Using the simple aggregative method, the price index for the current year (base year = 100) is:

The simple aggregative price index is 131.25. Total current-year prices are Rs 210 and total base-year prices are Rs 160, so 210 divided by 160 times 100 gives 131.25, showing prices rose about 31 percent over the base year.

  1. A125
  2. B131.25Correct
  3. C118.75
  4. D150

Explanation

Sum of base prices = 40+100+20 = 160. Sum of current prices = 50+130+30 = 210. Index = 210/160 x 100 = 131.25. The value 125 results from comparing only rice, while 150 comes from comparing only sugar.

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