Question

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%	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

What is the cost of living index of during the year 2004 as compared with 1995?

Answer 1

Items	Weight W	Price in 1995 P0	Price in 2004 P1		WR
Food	35	1400	1500		3,749.90
Fuel	10	200	250		1,250
Clothing	20	500	750		3,000
Rent	15	200	300		2,250
Misc.	20	250	400		3,200

Cost of Living Index = 134.50

Thus, the prices rose by 34.50% during 1995 and 2004.