Question

Calculate price index for the following by using price relative method.

Material	Cement	Timber	Steel	Bricks
Price in 1969 (in Rs)	5	9.5	35	12
Price in 1970 (in Rs)	8	14.3	42	24

• A. 152.34
• B. 135.5
• C. 157.5
• D. 154.25

Answer 1

The correct option is C 157.5

$Material$	$Pricein1969$ $(inRs.)\left[P_0\right]$	$Pricein1970$ $(inRs.)\left[P_1\right]$	$PriceRelative$ $\frac{P_1}{P_0}\times 100$
$Cement$	$5$	$8$	$160.00$
$Timber$	$9.5$	$14.3$	$150.52$
$Steel$	$35$	$42$	$120.00$
$Bricks$	$12$	$24$	$200.00$
$Total$			$630.52$

$\Rightarrow$ $P_{01}=\frac{\frac{P_1}{P_0}\times 100}{N}=\frac{630.52}{4}=157.5$

$\therefore$ Price index for 1970, taking 1969 for base year = $157.5$