Question 1

Q1: An index number which accounts for the relative importance of the items is known as (i) weighted index (ii) simple aggregative index (iii) simple aver...

Accepted Answer

(i) weighted index Explanation: A weighted index, as described in the chapter, is one where the relative importance of different items is taken into account by assigning them specific weights. This is in contrast to simple indices where all items are treated as having equal importance.

Question 2

Q10: What does a consumer price index for industrial workers measure?

Accepted Answer

A Consumer Price Index (CPI) for industrial workers measures the average change over time in the retail prices of a fixed basket of goods and services consumed by a typical industrial worker's household. It essentially measures the change in the cost of living for this specific group. For instance,...

Question 3

Q11: What is the difference between a price index and a quantity index?

Accepted Answer

The main difference between a price index and a quantity index lies in what they measure:    Price Index: A price index measures the average change in the prices of a group of commodities over a period. Its purpose is to show the general trend of price levels. Examples include the Consumer Price Ind...

Question 4

Q12: Is the change in any price reflected in a price index number?

Accepted Answer

No, the change in the price of any and every commodity is not reflected in a price index number. A price index is constructed based on a selected basket of representative items. Therefore: 1.  Inclusion in the Basket: If the price of a commodity that is not included in the selected basket changes, i...

Question 5

Q13: Can the CPI for urban non-manual employees represent the changes in the cost of living of the President of India?

Accepted Answer

No, the CPI for urban non-manual employees cannot represent the changes in the cost of living of the President of India. The reason is that the consumption basket and expenditure pattern of the President would be vastly different from that of a typical urban non-manual employee. The goods and servic...

Question 6

Q14: The monthly per capita expenditure incurred by workers for an industrial centre during 1980 and 2005 on the following items are given below. The weigh...

Accepted Answer

To prepare the weighted index number for the cost of living for 2005 with 1980 as the base, we will use the weighted average of price relatives method. The formula is: Cost of Living Index = (ΣWR) / ΣW Where:    W = Weight of the item    R = Price Relative = (Price in Current Year / Price in Base Ye...

Question 7

Q15: Read the following table carefully and give your comments. INDEX OF INDUSTRIAL PRODUCTION BASE 1993-94 | Industry | Weight in % | 1996-97 | 2003-2004...

Accepted Answer

Based on the provided table for the Index of Industrial Production (IIP), the following comments can be made: 1.  Overall Industrial Growth: The General Index, which represents the overall industrial production, increased from 130.8 in 1996-97 to 189.0 in 2003-04. This indicates a robust growth in t...

Question 8

Q16: Try to list the important items of consumption in your family.

Accepted Answer

This is an activity-based question that requires a personalized answer. The important items of consumption in a typical family can be categorized as follows:    Food:        Cereals (Wheat, Rice)        Pulses (Dal)        Vegetables and Fruits        Milk and Dairy Products (Butter, Ghee, Cheese)...

Question 9

Q17: If the salary of a person in the base year is Rs 4,000 per annum and the current year salary is Rs 6,000, by how much should his salary be raised to m...

Accepted Answer

To maintain the same standard of living, the person's salary must increase in proportion to the increase in the Consumer Price Index (CPI). 1.  Base Year Salary: Rs 4,000 2.  Base Year CPI: 100 (The CPI of the base year is always 100) 3.  Current Year CPI: 400 First, we calculate the salary required...

Question 10

Q18: The consumer price index for June, 2005 was 125. The food index was 120 and that of other items 135. What is the percentage of the total weight given...

Accepted Answer

We can solve this using the formula for a weighted index. Let:    The weight of food be W₁    The weight of other items be W₂    The total weight is 100, so W₁ + W₂ = 100, which means W₂ = 100 - W₁ Given:    Overall CPI = 125    Food Index (I₁) = 120    Other Items Index (I₂) = 135 The formula for t...

Question 11

Q19: An enquiry into the budgets of the middle class families in a certain city gave the following information; | Expenses on items | Food 35% | Fuel 10% |...

Accepted Answer

To find the cost of living index for 2004 with 1995 as the base year, we will use the weighted average of price relatives method. Formula: Cost of Living Index = ΣWR / ΣW Where:    W = Weight (given as a percentage)    R = Price Relative = (Price in 2004 / Price in 1995) × 100 Step 1: Calculate the...

Question 12

Q2: In most of the weighted index numbers the weight pertains to (i) base year (ii) current year (iii) both base and current year

Accepted Answer

(i) base year Explanation: The chapter explains that in general, the base period weight is preferred to the current period weight. This is because calculating the weight every year is inconvenient, and using a fixed base year allows for more consistent and comparable measurements over time. Laspeyre...

Question 13

Q20: Record the daily expenditure, quantities bought and prices paid per unit of the daily purchases of your family for two weeks. How has the price change...

Accepted Answer

This is an activity-based question requiring personal data collection and analysis. Here is a guide on how to approach it: Step 1: Data Collection (for two weeks) Create a daily log for two consecutive weeks. For each day, record:    Item: Name of the item purchased (e.g., Milk, Bread, Petrol, Veget...

Question 14

Q21: Given the following data- | Year | CPI of industrial workers (1982=100) | CPI of agricultural labourers (1986-87 = 100) | WPI (1993-94=100) | | :--- |...

Accepted Answer

(i) Comment on the relative values of the index numbers:    Upward Trend: All three indices—CPI for Industrial Workers (CPI-IW), CPI for Agricultural Labourers (CPI-AL), and Wholesale Price Index (WPI)—show a consistent and continuous increase from 1995-96 to 2003-04. This indicates a general trend...

Question 15

Q22: The monthly expenditure (Rs.) of a family on some important items and the Goods and Services Tax (GST) rates applicable to these items is as follows:...

Accepted Answer

To calculate the average GST rate for this family, we need to use the formula for a weighted average. Here, the expenditure on each item acts as the weight (w), and the GST rate is the variable (x). The average tax rate is calculated as: Average GST Rate = (Σwx) / (Σw) First, we group the items by t...

Question 16

Q3: The impact of change in the price of a commodity with little weight in the index will be (i) small (ii) large (iii) uncertain

Accepted Answer

(i) small Explanation: In a weighted index number, the weight assigned to a commodity reflects its relative importance. Therefore, a commodity with a small weight will have a minimal impact on the overall index value, even if its price changes significantly.

Question 17

Q4: A consumer price index measures changes in (i) retail prices (ii) wholesale prices (iii) producers prices

Accepted Answer

(i) retail prices Explanation: The chapter states that the Consumer Price Index (CPI), also known as the cost of living index, measures the average change in retail prices. It reflects the prices that consumers pay for a specific basket of goods and services.

Question 18

Q5: The item having the highest weight in consumer price index for industrial workers is (i) Food (ii) Housing (iii) Clothing

Accepted Answer

(i) Food Explanation: According to the table of weights for the All-India Combined Consumer Price Index provided in the chapter, the 'Food and beverages' group has the highest weight at 45.86%. This indicates that food items constitute the largest portion of the expenditure for the consumer groups m...

Question 19

Q6: In general, inflation is calculated by using (i) wholesale price index (ii) consumer price index (iii) producers' price index

Accepted Answer

(i) wholesale price index Explanation: The chapter explicitly states that the Wholesale Price Index (WPI) is widely used to measure the rate of inflation. The change in the 'All Commodities' WPI is often referred to as 'Headline Inflation'.

Question 20

Q7: Why do we need an index number?

Accepted Answer

We need index numbers because they are statistical devices that simplify complex data and measure changes over time. They serve several important purposes:    Summarizing Change: An index number provides a single summary figure that measures the overall change in a group of related variables, such a...

Industry	Weight in %	1996-97	2003-2004
General index	100	130.8	189.0
Mining and quarrying	10.73	118.2	146.9
Manufacturing	79.58	133.6	196.6
Electricity	10.69	122.0	172.6

Expenses on items	Food 35%	Fuel 10%	Clothing 20%	Rent 15%	Misc. 20%
Price (in Rs) in 2004	1500	250	750	300	400
Price (in Rs) in 1995	1400	200	500	200	250

Year	CPI of industrial workers (1982=100)	CPI of agricultural labourers (1986-87 = 100)	WPI (1993-94=100)
1995-96	313	234	121.6
1996-97	342	256	127.2
1997-98	366	264	132.8
1998-99	414	293	140.7
1999-00	428	306	145.3
2000-01	444	306	155.7
2001-02	463	309	161.3
2002-03	482	319	166.8
2003-04	500	331	175.9

Item	Monthly Expense(Rs)	GST Rate %
Cereals	1500	0
Eggs	250	0
Fish, Meat	250	0
Medicines	50	5
Biogas	50	5
Transport	100	5
Butter	50	12
Babool	10	12
Tomato Ketchup	40	12
Biscuits	75	18
Cakes, Pastries	25	18
Branded Garments	100	18
Vacuum Cleaner, Car	1000	28

Items	Price in 1980	Price in 2005
Food	100	200
Clothing	20	25
Fuel & lighting	15	20
House rent	30	40
Misc	35	65

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