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If the price of all commodities in a place has increased 125 times in comparison to the base period prices, then the index number of prices for the place is now
- a)100
- b)125
- c)225
- d)None of the above
Correct answer is option 'C'. Can you explain this answer?
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Verified Answer
If the price of all commodities in a place has increased 125 times in ...
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
Most Upvoted Answer
If the price of all commodities in a place has increased 125 times in ...
Explanation:
An index number is a measure of the average price level of a group of commodities at a particular point in time as compared to the same group of commodities at some base period. In this question, the base period prices are given and we have to find the index number of prices for the place at present.
Let the base period price of a commodity be P and the present price of the same commodity be Q. Also, let the index number of prices for the place be x.
According to the question, the price of all commodities in the place has increased 125 times in comparison to the base period prices. Therefore,
Q = 125P
To calculate the index number, we use the formula:
x = (Total cost of commodities at current prices / Total cost of commodities at base period prices) x 100
Let there be n number of commodities in the place.
Total cost of commodities at current prices = Q1 + Q2 + ... + Qn
= 125P + 125P + ... + 125P (n times)
= 125nP
Total cost of commodities at base period prices = P1 + P2 + ... + Pn
= P + P + ... + P (n times)
= nP
Substituting these values in the formula for the index number, we get:
x = (125nP / nP) x 100
= 125 x 100
= 12,500
Therefore, the index number of prices for the place is 12,500, which is option (c).
An index number is a measure of the average price level of a group of commodities at a particular point in time as compared to the same group of commodities at some base period. In this question, the base period prices are given and we have to find the index number of prices for the place at present.
Let the base period price of a commodity be P and the present price of the same commodity be Q. Also, let the index number of prices for the place be x.
According to the question, the price of all commodities in the place has increased 125 times in comparison to the base period prices. Therefore,
Q = 125P
To calculate the index number, we use the formula:
x = (Total cost of commodities at current prices / Total cost of commodities at base period prices) x 100
Let there be n number of commodities in the place.
Total cost of commodities at current prices = Q1 + Q2 + ... + Qn
= 125P + 125P + ... + 125P (n times)
= 125nP
Total cost of commodities at base period prices = P1 + P2 + ... + Pn
= P + P + ... + P (n times)
= nP
Substituting these values in the formula for the index number, we get:
x = (125nP / nP) x 100
= 125 x 100
= 12,500
Therefore, the index number of prices for the place is 12,500, which is option (c).
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If the price of all commodities in a place has increased 125 times in comparison to the base period prices, then the index number of prices for the place is nowa)100b)125c)225d)None of the aboveCorrect answer is option 'C'. Can you explain this answer?
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