Question

Following are the prices of commodities in the year 2011 and 2016. Calculate the price index using price relatives method.

Commodity	Prices in year 2011	Prices in 2016
A	45	55
B	60	70
C	20	30
D	50	75
E	85	90
F	120	130

Answer 1

Commodity	Price in 2011 (P0)	Price in 2016 (P1)	Price Relative=$\frac{{\mathit{P}}_{\mathbf{1}}}{{\mathit{P}}_{\mathbf{0}}}\mathbf{\times }\mathbf{100}$
A	45	55	$\frac{55}{45}\times 100=122.22$
B	60	70	$\frac{70}{60}\times 100=116.67$
C	20	30	$\frac{30}{20}\times 100=150$
D	50	75	$\frac{75}{50}\times 100=150$
E	85	90	$\frac{90}{85}\times 100=105.88$
F	120	130	$\frac{130}{120}\times 100=108.33$
			$\mathrm{\Sigma }\left(\frac{P_{\mathit{1}}}{P_0}\times 100\right)=753.1$

$$\begin{gathered} P_{01}=\frac{\mathrm{\Sigma }\left({\displaystyle \frac{P_1}{P_0}}\times 100\right)}{\mathrm{N}} \\ \mathrm{or},P_{01}=\frac{753.1}{6} \\ \Rightarrow P_{01}=125.515 \end{gathered}$$