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If the prices of all commodities in a place have increased 1.25 times in comparison to the base period, the index number of prices of that place is now
- a)125
- b)150
- c)225
- d)None of these
Correct answer is option 'C'. Can you explain this answer?
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Verified Answer
If the prices of all commodities in a place have increased 1.25 times ...
According to the question, Given : P1 = P0 + 1.25 P0
P1 = 2.25 P0
In index numbers, we assume base price P0 = 100
P1 = 2.25 ( 100)
P1 = 225
Price of that place = 225
P1 = 2.25 P0
In index numbers, we assume base price P0 = 100
P1 = 2.25 ( 100)
P1 = 225
Price of that place = 225
Most Upvoted Answer
If the prices of all commodities in a place have increased 1.25 times ...
Explanation:
To calculate the index number of prices, we need to compare the prices of commodities in a given period with the prices in the base period. In this case, the prices of all commodities have increased by 1.25 times in comparison to the base period.
Formula:
Index Number = (Current Price / Base Price) * 100
Step 1:
Let's assume the base price as 'x'.
Since the prices have increased by 1.25 times, the current price would be 1.25x.
Step 2:
Using the formula, we can calculate the index number:
Index Number = (1.25x / x) * 100 = (1.25 * 100) = 125
Therefore, the index number of prices in that place is 125.
Significance of Index Number:
The index number provides a measure of the average price changes of a basket of goods and services over time. It helps in comparing the price levels between different time periods and assessing the rate of inflation or deflation. In this case, the index number of 125 indicates that prices have increased by 25% in comparison to the base period.
To calculate the index number of prices, we need to compare the prices of commodities in a given period with the prices in the base period. In this case, the prices of all commodities have increased by 1.25 times in comparison to the base period.
Formula:
Index Number = (Current Price / Base Price) * 100
Step 1:
Let's assume the base price as 'x'.
Since the prices have increased by 1.25 times, the current price would be 1.25x.
Step 2:
Using the formula, we can calculate the index number:
Index Number = (1.25x / x) * 100 = (1.25 * 100) = 125
Therefore, the index number of prices in that place is 125.
Significance of Index Number:
The index number provides a measure of the average price changes of a basket of goods and services over time. It helps in comparing the price levels between different time periods and assessing the rate of inflation or deflation. In this case, the index number of 125 indicates that prices have increased by 25% in comparison to the base period.
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Community Answer
If the prices of all commodities in a place have increased 1.25 times ...
100 is base period
1.25 increase
100+125
225
1.25 increase
100+125
225
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If the prices of all commodities in a place have increased 1.25 times in comparison to the base period, the index number of prices of that place is nowa)125b)150c)225d)None of theseCorrect answer is option 'C'. Can you explain this answer?
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