Question

If the salary of a person in the base year is Rs. 4000 per annum and the current year salary is Rs. 6000 by how much should his salary rise to maintain the same standard of living if the CPI is 400?

Answer 1

Base CPI = Rs. 100
Current CPI = Rs. 400
Base year salary = Rs. 4,000
Current year salary = Rs. 6,000
When base CPI is Rs. 100, then the salary is = Rs. 4,000 Current salary equivalent to base year salary
$=\frac{\text{Base year salary}}{100}\times CPI$
When CPI is Rs. 400, then the salary should be $\frac{4,000}{100}\times 400$ = Rs.16,000
Thus his salary should be Rs. 16,000 to maintain his purchasing power. Therefore, in the current year, his salary should increase by
Rs. 16,000 - Rs. 6,000 = Rs. 10,000 so as to maintain the same level of living in the current year as that of the base year.