Question

Construct the cost of living index for the year 2012 on the basis of 2004 from the following data and give your comments :

$\begin{array}{cccc}\text{Items}& \text{Price(in Rs) in 2004}& \text{Price(in Rs) in 2012}& \text{Weights}\\ \text{Food}& 39& 47& 4\\ \text{Fuel}& 8& 12& 1\\ \text{Cloth}& 14& 18& 3\\ \text{Rent}& 12& 15& 2\\ \text{Others}& 25& 30& 1\end{array}$

Answer 1

$\begin{array}{cccccc}\text{Items}& P_0& P_1& R=\frac{P_1}{P_0}\ast 100& \text{Weights}& \text{Weighted Relative}\\ & & & & \text{(W)}& \text{(RW)}\\ \text{Food}& 39& 47& 120.51& 4& 482.04\\ \text{Fuel}& 8& 12& 150& 1& 150\\ \text{Cloth}& 14& 18& 128.57& 3& 385.71\\ \text{Rent}& 12& 15& 125& 2& 250\\ \text{Other}& 25& 30& 130& 1& 120\\ & & & & \sum W=11& \sum RW=1387.75\end{array}$

Cost of living index = $\frac{\sum RW}{\sum W}=\frac{1387.75}{11}=126.16$

It shows that cost of living has gone up by 26.16% in 2012 compared to 2004.