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The consumer price Index for April 1985 was 125. The food price index was 120 and other items index was 135. The percentage of the total weight of the index is
  • a)
    66.67
  • b)
    68.28
  • c)
    90.25
  • d)
    None of these 
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
The consumer price Index for April 1985 was 125. The food price index ...
Given information:
Consumer Price Index (CPI) for April 1985 = 125
Food Price Index = 120
Other Items Index = 135

We need to find the percentage of the total weight of the index.

Total weight of the index = (Weight of Food Price Index) + (Weight of Other Items Index)

To calculate the weight of each index, we need to use the Laspeyres formula:

Weight of Food Price Index = (Price of Food Items in the base year × Quantity of Food Items in the current year) ÷ (Price of Food Items in the base year × Quantity of Food Items in the base year) × 100

Weight of Other Items Index = (Price of Other Items in the base year × Quantity of Other Items in the current year) ÷ (Price of Other Items in the base year × Quantity of Other Items in the base year) × 100

Let's assume that the base year is 1984.

According to the question, CPI for April 1985 = 125
Therefore, the price level in 1985 is 125/100 = 1.25 times the price level in 1984.

Let's assume that the total expenditure in 1984 on food items and other items was Rs. 100.

Price of Food Items in 1984 = Rs. 50
Quantity of Food Items in 1984 = 2 units
Price of Other Items in 1984 = Rs. 50
Quantity of Other Items in 1984 = 2 units

Price of Food Items in 1985 = 1.25 × Rs. 50 = Rs. 62.50
Quantity of Food Items in 1985 = 3 units
Price of Other Items in 1985 = 1.25 × Rs. 50 = Rs. 62.50
Quantity of Other Items in 1985 = 3 units

Using the Laspeyres formula, we can calculate the weight of each index:

Weight of Food Price Index = (Rs. 50 × 3) ÷ (Rs. 50 × 2) × 100 = 150/100 = 1.5
Weight of Other Items Index = (Rs. 50 × 3) ÷ (Rs. 50 × 2) × 100 = 150/100 = 1.5

Total weight of the index = 1.5 + 1.5 = 3

Percentage of the total weight of the index = (Total weight of the index ÷ 2) × 100 = (3 ÷ 2) × 100 = 66.67%

Therefore, the correct option is (a) 66.67.
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The consumer price Index for April 1985 was 125. The food price index was 120 and other items index was 135. The percentage of the total weight of the index isa)66.67b)68.28c)90.25d)None of theseCorrect answer is option 'A'. Can you explain this answer?
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