Question

Compute a weighted index number of the following data using price relative method:

$\begin{array}{cccc}\text{Item}& \text{Price in 1997 (P0)}& \text{Price in 2011 (P1)}& \text{Quantity consumed in 1997}\\ \text{Rice}& 2& 3& 24\\ \text{Cotton}& 4& 5& 14\\ \text{Sugar}& 6& 9& 8\\ \text{Wheat}& 10& 12& 4\\ \text{Other Cereals}& 5& 5& 8\end{array}$

• A. 135
• B. 134
• C. 133
• D. 132

Answer 1

The correct option is A

135

Look at the table below:

$\begin{array}{cccccc}\text{Item}& \text{Price in 1997 (P0)}& \text{Price in 2011 (P1)}& \text{Quantity}& \text{Price relative =R =}& \text{Weighted}\\ & & & \text{consumed in 1997 (W)}& \left(\frac{P1}{P0}\right)& \text{Price relative = WR}\\ \text{Rice}& 2& 3& 24& \frac{3}{2}=1.5& 1.5\times 24=36\\ \text{Cotton}& 4& 5& 14& \frac{5}{4}=1.25& 1.25\times 14=17.5\\ \text{Sugar}& 6& 9& 8& \frac{9}{6}=1.5& 1.5\times 8=12\\ \text{Wheat}& 10& 12& 4& \frac{12}{10}=1.2& 1.2\times 4=4.8\\ \text{Other Cereals}& 5& 5& 8& \frac{5}{5}=1& 1\times 8=8\\ \text{Total}& & 58& & & 78.3\end{array}$
$P01=\frac{\sum WR}{\sum W}\ast 100=\frac{78.3}{58}\ast 100=135$