NCERT Solutions for Class 11 Economics Chapter 7: Index Numbers (Statistics for Economics, 2026–27)

These Class 11 Economics Chapter 7 solutions cover Index Numbers from Statistics for Economics, the NCERT textbook for the 2026–27 session. An index number is a statistical device for measuring the average change in a group of related variables over two situations. This page reproduces every NCERT Exercises question verbatim and solves all of them — the multiple-choice items, the short theory questions, and every numerical (weighted cost-of-living index, Laspeyre’s and Paasche’s reasoning, CPI and weighted-average GST) worked out step by step in tables and verified. You also get key formulas, extra short and long questions, MCQs, Assertion–Reason practice, exam tips and FAQs.

Class: 11 Subject: Economics Book: Statistics for Economics Chapter: 7 Topic: Index Numbers Session: 2026–27
On this page

Class 11 Economics Chapter 7 – Overview

Chapter 7, Index Numbers, teaches how a single figure can summarise change in many related variables at once. An index number measures the average change in the magnitude of a group of related variables (such as prices or quantities) between a base period (given the value 100) and a current period, expressed as a percentage. The chapter explains price index numbers and quantity (volume) index numbers, and two methods of construction — the aggregative method (simple and weighted) and the method of averaging relatives (simple and weighted). A weighted aggregative index using base-period quantities is Laspeyre’s index, while one using current-period quantities is Paasche’s index. It then describes important real-world indices — the Consumer Price Index (CPI / cost-of-living index), the Wholesale Price Index (WPI), the Index of Industrial Production (IIP), the Sensex and the Human Development Index — and shows how they are used in measuring inflation, calculating real wages and the purchasing power of money, and in economic policy making.

Key Concepts & Important Formulas

Index number: a statistical device for measuring the average relative change in a group of related variables between two situations; conventionally expressed as a percentage with the base period = 100.

Base period & current period: the base period is the reference against which comparison is made (value = 100); the current period is the period being compared. An index of 250 means the value is 2½ times the base.

Price vs quantity index: a price index measures and compares changes in prices of goods; a quantity (volume) index measures changes in the physical volume of production, construction or employment.

Weighted vs unweighted: an unweighted index treats all items as equally important; a weighted index reflects the relative importance (weight) of each item, e.g. food carrying a larger weight than a minor item.

Laspeyre’s index: a weighted aggregative price index using base-period quantities (q₀) as weights.

Paasche’s index: a weighted aggregative price index using current-period quantities (q₁) as weights.

Consumer Price Index (CPI): also called the cost-of-living index, it measures the average change in retail prices of a fixed basket of goods consumed by a defined group (e.g. industrial workers).

Simple aggregative price index: P₀₁ = (ΣP₁ / ΣP₀) × 100

Simple average of price relatives: P₀₁ = (1/n) × Σ(P₁/P₀) × 100

Laspeyre’s price index: P₀₁ = (ΣP₁q₀ / ΣP₀q₀) × 100

Paasche’s price index: P₀₁ = (ΣP₁q₁ / ΣP₀q₁) × 100

Weighted index of price relatives (CPI): P₀₁ = (ΣWR / ΣW), where R = (P₁/P₀) × 100 and W = weight

Purchasing power of money = 1 / cost-of-living index (per rupee = 100/CPI). Real wage = (Money wage / CPI) × 100. Inflation is generally measured using the WPI.

NCERT “Exercises” — Full Solutions

All questions below are reproduced verbatim from the NCERT textbook’s end-of-chapter Exercises. Answers are original; numericals are solved step by step and verified.

1. An index number which accounts for the relative importance of the items is known as (i) weighted index   (ii) simple aggregative index   (iii) simple average of relatives

ANSWER (i) weighted index. A weighted index assigns weights to items in proportion to their relative importance (such as the share of expenditure), so that more important items influence the index more.

2. In most of the weighted index numbers the weight pertains to (i) base year   (ii) current year   (iii) both base and current year

ANSWER (i) base year. Base-year weights are generally preferred because calculating fresh weights every year is inconvenient, and base-year weights keep the basket fixed and comparable (this is the basis of Laspeyre’s index).

3. The impact of change in the price of a commodity with little weight in the index will be (i) small   (ii) large   (iii) uncertain

ANSWER (i) small. Since the contribution of an item to a weighted index is proportional to its weight, a price change in a low-weight commodity has only a small effect on the overall index.

4. A consumer price index measures changes in (i) retail prices   (ii) wholesale prices   (iii) producers prices

ANSWER (i) retail prices. The CPI (cost-of-living index) reflects the prices actually paid by consumers at the retail level for a typical basket of goods and services.

5. The item having the highest weight in consumer price index for industrial workers is (i) Food   (ii) Housing   (iii) Clothing

ANSWER (i) Food. Food and beverages occupy the largest proportion of a worker’s expenditure, so this group carries the highest weight in the CPI for industrial workers.

6. In general, inflation is calculated by using (i) wholesale price index   (ii) consumer price index   (iii) producers’ price index

ANSWER (i) wholesale price index. In India the WPI is widely used to measure the rate of inflation, as it captures the general change in price level and the data are available quickly.

7. Why do we need an index number?

ANSWER When many related variables change at different rates, describing each change separately is confusing. An index number condenses all these changes into a single comparable figure, showing the average change between two periods. Index numbers are indispensable in practice: the WPI and CPI measure inflation and the cost of living; the CPI helps calculate real wages and the purchasing power of money and is used in wage negotiation, income, price and rent policy and taxation; the IIP shows changes in industrial output; the agricultural production index tracks farm performance; and the Sensex guides investors. They are therefore essential tools in economic analysis and policy making.

8. What are the desirable properties of the base period?

ANSWER The base period should be a normal year — free from abnormal events such as war, famine, boom, slump, earthquake or major political upheaval — so that it does not contain extreme values. It should not be too far in the past, because old baskets become unrepresentative (many items in a 1960 basket no longer exist); a comparison of 1993 with 2005 is more meaningful than 1960 with 2005. The base period should also be of a suitable length and the base must be updated routinely to keep the index relevant.

9. Why is it essential to have different CPI for different categories of consumers?

ANSWER Different groups of consumers have different consumption baskets and spending patterns, so the same price change affects them differently. For instance, a rise in the petrol price hardly touches a poor agricultural labourer, but it matters to urban commuters. Because the items and their weights differ from group to group, a single index cannot fairly represent everyone. Hence separate CPIs are prepared — for industrial workers, agricultural labourers, rural labourers, and urban consumers — so that each measures the cost-of-living change for that category accurately.

10. What does a consumer price index for industrial workers measure?

ANSWER The CPI for industrial workers measures the average change in the retail prices of a fixed basket of goods and services typically consumed by industrial workers, relative to a base year (base 2001 = 100). For example, a CPI(IW) of 277 in December 2014 means a worker who spent Rs 100 on that basket in 2001 needed Rs 277 in December 2014 to buy the same basket — it tracks the change in their cost of living.

11. What is the difference between a price index and a quantity index?

ANSWER A price index measures and permits comparison of the change in the prices of a specified set of goods between two periods (e.g. CPI, WPI). A quantity (volume) index measures the change in the physical volume of goods — production, construction or employment — rather than their prices (e.g. the Index of Industrial Production). In short, a price index reflects price change while a quantity index reflects change in physical output.

12. Is the change in any price reflected in a price index number?

ANSWER No. A price index is based only on a selected, representative basket of items. A price change is reflected in the index only if that commodity is included in the basket. If an item is not in the basket, a change in its price does not affect the index. Moreover, the impact of an included item depends on its weight, so a price change in a low-weight item has only a small effect.

13. Can the CPI for urban non-manual employees represent the changes in the cost of living of the President of India?

ANSWER No. The CPI for urban non-manual employees is built from the consumption basket and spending pattern of ordinary urban non-manual workers. The President of India has an entirely different lifestyle and basket of goods and services, so this index cannot represent the change in the President’s cost of living. An index represents only the group for whose typical basket it is constructed.

14. The monthly per capita expenditure incurred by workers for an industrial centre during 1980 and 2005 on the following items are given below. The weights of these items are 75, 10, 5, 6 and 4 respectively. Prepare a weighted index number for cost of living for 2005 with 1980 as the base.

ItemsPrice in 1980Price in 2005
Food100200
Clothing2025
Fuel & lighting1520
House rent3040
Misc3565
ANSWER Use the weighted index of price relatives: CPI = ΣWR / ΣW, where R = (P₁/P₀) × 100.
ItemWeight WP₀ (1980)P₁ (2005)R = (P₁/P₀)×100WR
Food75100200200.0015000.00
Clothing102025125.001250.00
Fuel & lighting51520133.33666.67
House rent63040133.33800.00
Misc43565185.71742.86
Total10018459.53
CPI = ΣWR / ΣW = 18459.53 / 100 = 184.6 (approx.). Interpretation: the cost of living in 2005 is about 184.6, i.e. it has risen by roughly 84.6 per cent compared with 1980.

15. Read the following table carefully and give your comments.

INDEX OF INDUSTRIAL PRODUCTION BASE 1993–94
IndustryWeight in %1996–972003–2004
General index100130.8189.0
Mining and quarrying10.73118.2146.9
Manufacturing79.58133.6196.6
Electricity10.69122.0172.6
ANSWER With 1993–94 as base (= 100), industrial production rose in every sub-sector and overall in both years, with much higher levels in 2003–04 than in 1996–97. General index: rose from 130.8 (a 30.8% rise over the base) in 1996–97 to 189.0 (an 89% rise) in 2003–04, showing strong growth in industrial output over the decade. Manufacturing carries by far the largest weight (79.58%) and grew the most — from 133.6 to 196.6 — so it is the main driver of the rise in the general index. Electricity (weight 10.69%) grew from 122.0 to 172.6, and mining and quarrying (weight 10.73%) grew the least, from 118.2 to 146.9. Comment: overall industrial production improved substantially between 1996–97 and 2003–04; manufacturing, having the highest weight and highest growth, contributed the most to this rise, while mining lagged behind. This reflects healthy industrial expansion in the economy during the period.

16. Try to list the important items of consumption in your family.

ANSWER This is an activity, so answers will vary; list the items your own family actually buys regularly. A model list of important items of consumption is: Food: cereals (rice, wheat/flour), pulses (dal), edible oil, milk and milk products, vegetables, fruits, sugar, salt, spices, eggs/fish/meat. Fuel & light: LPG/cooking gas, electricity, petrol/diesel. Clothing & footwear. Housing: house rent or maintenance. Education: school/tuition fees, books, stationery. Health: medicines, doctor’s fees. Transport & communication: bus/auto fare, mobile recharge, internet. Miscellaneous: toiletries, cleaning items, recreation. Food usually takes the largest share of the family budget. (Use your family’s real items.)

17. If the salary of a person in the base year is Rs 4,000 per annum and the current year salary is Rs 6,000, by how much should his salary be raised to maintain the same standard of living if the CPI is 400?

ANSWER Step 1 – salary needed to keep the base-year standard of living: multiply the base salary by CPI/100. Required salary = Rs 4,000 × (400 / 100) = Rs 4,000 × 4 = Rs 16,000. Step 2 – compare with the current salary: the person already earns Rs 6,000, so the additional rise needed = 16,000 − 6,000 = Rs 10,000. Conclusion: to maintain the same standard of living the salary should be raised by Rs 10,000 (i.e. to Rs 16,000 per annum).

18. The consumer price index for June, 2005 was 125. The food index was 120 and that of other items 135. What is the percentage of the total weight given to food?

ANSWER Let the weight (proportion) of food = w, so the weight of other items = (1 − w). The overall CPI is the weighted average of the two indices: 125 = 120w + 135(1 − w) 125 = 120w + 135 − 135w ⇒ 125 − 135 = −15w ⇒ −10 = −15w w = 10 / 15 = 0.6667 Percentage weight given to food = 66.67% (about two-thirds); the weight of other items is 33.33%.

19. An enquiry into the budgets of the middle class families in a certain city gave the following information; What is the cost of living index during the year 2004 as compared with 1995?

Expenses on itemsFoodFuelClothingRentMisc.
35%10%20%15%20%
Price (in Rs) in 20041500250750300400
Price (in Rs) in 19951400200500200250
ANSWER Take 1995 as base. Cost-of-living index = ΣWR / ΣW, where R = (P₂₀₀₄/P₁₉₉₅) × 100 and W is the % weight.
ItemWeight W (%)P (1995)P (2004)R = (P₂₀₀₄/P₁₉₉₅)×100WR
Food3514001500107.143750.00
Fuel10200250125.001250.00
Clothing20500750150.003000.00
Rent15200300150.002250.00
Misc.20250400160.003200.00
Total10013450.00
Cost-of-living index (2004) = ΣWR / ΣW = 13450 / 100 = 134.5. Interpretation: the cost of living of middle-class families in this city rose by about 34.5 per cent in 2004 compared with 1995.

20. Record the daily expenditure, quantities bought and prices paid per unit of the daily purchases of your family for two weeks. How has the price change affected your family?

ANSWER This is a project, so use your family’s real data. Method: each day, note every item bought, its quantity and the price per unit, and the amount spent. Tabulate the data day-wise, then for the two-week period compute, for each item, the price relative R = (current price / first-day price) × 100 and a weighted daily price index using expenditure shares as weights. How to comment on the effect: if the price index for the second week is higher than the first, prices have risen and your family had to spend more for the same quantities (or buy less); if it is lower, prices fell and the family saved or could buy more. Note which items (e.g. vegetables, fuel) changed most and how the family adjusted — substituting cheaper items, reducing quantity, or spending extra. (Answer using your own recorded figures.)

21. Given the following data—

YearCPI of industrial workers (1982 = 100)CPI of agricultural labourers (1986–87 = 100)WPI (1993–94 = 100)
1995–96313234121.6
1996–97342256127.2
1997–98366264132.8
1998–99414293140.7
1999–00428306145.3
2000–01444306155.7
2001–02463309161.3
2002–03482319166.8
2003–04500331175.9

(i) Comment on the relative values of the index numbers.

(ii) Are they comparable?

ANSWER (i) Comment on the relative values: All three index numbers rise steadily over the period, showing a continuous increase in prices (inflation). The CPI of industrial workers is the highest throughout, rising from 313 to 500 — an increase of about 60% over the period — reflecting a sharp rise in their cost of living. The CPI of agricultural labourers rises from 234 to 331 (about 41%), a slower increase. The WPI rises from 121.6 to 175.9 (about 45%). Thus the cost of living of industrial workers rose faster than that of agricultural labourers, while wholesale prices rose moderately. (ii) Are they comparable? No, they are not directly comparable. The three indices have different base years (1982, 1986–87 and 1993–94) and cover different baskets of goods and different categories (industrial workers, agricultural labourers, and wholesale prices in general). Because the bases and baskets differ, their absolute values cannot be compared side by side; we can only compare the trend or rate of change within each series, not the level of one against another. To compare them properly they must first be converted to a common base year.

22. The monthly expenditure (Rs.) of a family on some important items and the Goods and Services Tax (GST) rates applicable to these items is as follows: Calculate the average tax rate as far as this family is concerned.

ItemMonthly Expense (Rs)GST Rate %
Cereals15000
Eggs2500
Fish, Meat2500
Medicines505
Biogas505
Transport1005
Butter5012
Babool1012
Tomato Ketchup4012
Biscuits7518
Cakes, Pastries2518
Branded Garments10018
Vacuum Cleaner, Car100028
ANSWER The average GST rate is a weighted average, where the weights are the shares of expenditure on each category and the variable is the GST rate. Group the items by their common GST rate and add up the expenditure in each group.
Category (GST slab)Expenditure / Weight (w)GST Rate (x)wx
Category 1 (0%): Cereals, Eggs, Fish & Meat20000.000
Category 2 (5%): Medicines, Biogas, Transport2000.0510
Category 3 (12%): Butter, Babool, Tomato Ketchup1000.1212
Category 4 (18%): Biscuits, Cakes/Pastries, Branded Garments2000.1836
Category 5 (28%): Vacuum Cleaner, Car10000.28280
Total3500338
Average GST rate = Σwx / Σw = 338 / 3500 = 0.0966. The average tax (GST) rate for this family is 0.0966, i.e. about 9.66 per cent.

Extra Practice Questions

Short Answer Type Questions

Q1. Define an index number.

ANSWERAn index number is a statistical device for measuring the average change in the magnitude of a group of related variables (such as prices or quantities) between a base period and a current period. It is conventionally expressed as a percentage, with the base period given the value 100.

Q2. Distinguish between Laspeyre’s and Paasche’s price index.

ANSWERBoth are weighted aggregative price indices; the only difference is the weights. Laspeyre’s index uses base-period quantities (q₀) as weights: P₀₁ = (ΣP₁q₀/ΣP₀q₀)×100. Paasche’s index uses current-period quantities (q₁) as weights: P₀₁ = (ΣP₁q₁/ΣP₀q₁)×100.

Q3. If the cost-of-living index is 250, what is the purchasing power of a rupee?

ANSWERPurchasing power of a rupee = 100 / cost-of-living index = 100 / 250 = Rs 0.40. It means a rupee in the current period buys goods worth only 40 paise of base-period value — purchasing power has fallen by 60%.

Q4. What is meant by the ‘real wage’, and how is it calculated?

ANSWERThe real wage is the money wage adjusted for changes in the cost of living, showing the actual purchasing power of income. Real wage = (Money wage / Cost-of-living index) × 100. For example, a money wage of Rs 10,000 with a CPI of 526 gives a real wage of 10,000 × 100/526 = Rs 1,901 (in base-year terms).

Q5. Why is the Wholesale Price Index used to measure inflation rather than the CPI?

ANSWERThe WPI reflects the general change in the overall price level (it covers only goods, with no specific consumer category) and its data are available quickly. This makes it convenient for measuring the economy-wide rate of inflation, whereas the CPI relates only to a particular group of consumers’ cost of living.

Long Answer Type Questions

Q1. Explain the two methods of constructing a price index number.

ANSWERAn index number can be built by two methods. (1) The aggregative method compares the totals of prices. A simple aggregative price index is P₀₁ = (ΣP₁/ΣP₀)×100, but it is of limited use because the items’ units of measurement differ and all items are treated as equally important. A weighted aggregative index corrects this by valuing a fixed basket: P₀₁ = (ΣP₁q/ΣP₀q)×100; with base-period quantities it is Laspeyre’s index and with current-period quantities it is Paasche’s index. (2) The method of averaging relatives first finds each commodity’s price relative (P₁/P₀)×100 and then averages them. The simple average of relatives is P₀₁ = (1/n)Σ(P₁/P₀)×100; the weighted average of relatives is P₀₁ = ΣWR/ΣW, where weights are usually the expenditure shares of the commodities — the basis of the consumer price index.

Q2. Describe the important index numbers used in India and their uses.

ANSWERIndia prepares several important index numbers. The Consumer Price Index (CPI / cost-of-living index) measures the average change in retail prices of a fixed basket consumed by a group (industrial workers, agricultural labourers, rural and urban consumers); it is used in wage negotiation, framing income, price, rent and tax policy, and computing real wages and the purchasing power of money. The Wholesale Price Index (WPI) measures the change in the general price level of goods at the wholesale stage and is widely used to measure inflation and to deflate aggregates such as national income. The Index of Industrial Production (IIP) is a quantity index measuring changes in physical output of mining, manufacturing and electricity. The agricultural production index tracks farm-sector performance, and the Sensex (BSE Sensitive Index of 30 stocks) guides investors about the stock market and the economy’s health. These indices are indispensable in economic analysis and policy making.

Q3. Discuss the important issues that should be kept in mind while constructing an index number.

ANSWERSeveral issues must be considered. (1) Purpose of the index: be clear whether a price, quantity or value index is needed, since each requires different data. (2) Selection of items: include only items that are representative of the group, because items are not equally important for different consumers (a petrol-price rise barely affects poor agricultural labourers). (3) Choice of base year: it should be a normal year free of extreme values (no war, famine, boom or slump), not too far in the past, and updated routinely so the basket stays relevant. (4) Choice of formula: select the formula (e.g. Laspeyre’s or Paasche’s) suited to the question, as they differ only in the weights used. (5) Reliability of data: use accurate data, since poor-quality data give misleading results; if secondary data are used, choose the most reliable source. Careful attention to these issues gives a meaningful and dependable index.

MCQs & Assertion–Reason

1. The value of an index number in the base period is always:

(a) 0    (b) 50    (c) 100    (d) 1000

2. A weighted aggregative price index using base-period quantities as weights is known as:

(a) Paasche’s index    (b) Laspeyre’s index    (c) Fisher’s index    (d) simple aggregative index

3. Paasche’s price index uses as weights the:

(a) base-period quantities    (b) current-period quantities    (c) average of both quantities    (d) no weights

4. The formula (P₁/P₀) × 100 gives the:

(a) price relative    (b) quantity relative    (c) weight    (d) base value

5. The Consumer Price Index is also known as the:

(a) wholesale price index    (b) cost-of-living index    (c) production index    (d) volume index

6. The Index of Industrial Production is a:

(a) price index    (b) value index    (c) quantity (volume) index    (d) cost-of-living index

7. If the cost-of-living index is 200, the purchasing power of a rupee is:

(a) Re 1.00    (b) Re 0.50    (c) Re 0.20    (d) Rs 2.00

8. The Sensex is the sensitive index of the:

(a) National Stock Exchange    (b) Bombay Stock Exchange    (c) Reserve Bank of India    (d) Ministry of Finance

9. In India, the rate of inflation is generally measured using the:

(a) CPI    (b) WPI    (c) IIP    (d) Sensex

10. The simple aggregative price index has the limitation that it:

(a) needs too much data    (b) is influenced by the units of measurement and ignores relative importance    (c) cannot be calculated    (d) uses weights

Answer key: 1-(c), 2-(b), 3-(b), 4-(a), 5-(b), 6-(c), 7-(b), 8-(b), 9-(b), 10-(b).

For each Assertion–Reason question, choose: (A) Both true and the Reason correctly explains the Assertion; (B) Both true but the Reason is not the correct explanation; (C) Assertion true, Reason false; (D) Assertion false, Reason true.

A-R 1. Assertion: The base period of an index number is given the value 100.

Reason: An index number expresses the value of any period in proportion to the base period, in percentage terms.

A-R 2. Assertion: Laspeyre’s and Paasche’s indices always give the same value.

Reason: Laspeyre’s index uses base-period quantities as weights while Paasche’s uses current-period quantities.

A-R 3. Assertion: Different consumer price indices are prepared for different categories of consumers.

Reason: Different groups have different consumption baskets and spending patterns.

A-R 4. Assertion: A price change in a low-weight item has a large impact on a weighted index.

Reason: In a weighted index, an item’s contribution is proportional to its weight.

A-R 5. Assertion: The base year of an index number should be a normal year.

Reason: A year with extreme values such as a famine or boom would distort the comparison.

Answer key: 1-(A), 2-(D), 3-(A), 4-(D), 5-(A).

Exam Tips & Common Mistakes

How to score full marks in this chapter

Memorise the formulas precisely and write the formula before substituting values — examiners give marks for the correct formula. In numericals, always set out a neat working table (item, weight, P₀, P₁, R, WR) and show every total; then state the final index and interpret it in words (e.g. “prices rose by 34.5%”). Remember the key distinctions: Laspeyre’s = base-period quantities, Paasche’s = current-period quantities; price index vs quantity index; CPI = retail/cost of living while WPI is used for inflation. Learn the standard relations — purchasing power = 100/CPI, real wage = (money wage/CPI)×100, and salary to maintain standard of living = base salary × CPI/100.

Common mistakes to avoid

  • Confusing Laspeyre’s (base-year weights q₀) with Paasche’s (current-year weights q₁).
  • Forgetting to multiply the price relative by 100 (R = (P₁/P₀)×100, not just P₁/P₀).
  • In Q17, giving Rs 16,000 as the “rise” — the rise needed is 16,000 − 6,000 = Rs 10,000.
  • Comparing indices with different base years directly (as in Q21) — they are not comparable without a common base.
  • Treating a simple aggregative index as reliable — it ignores units and relative importance.
  • Mixing up a price index (prices) with a quantity index like the IIP (physical volume).
  • Leaving activity/project questions (Q16, Q20) blank instead of giving your own data.

Frequently Asked Questions

What is Chapter 7 of Class 11 Economics (Statistics for Economics) about?

Chapter 7, Index Numbers, explains how a single figure can measure the average change in a group of related variables between a base period and a current period. It covers price and quantity index numbers, the aggregative and averaging-of-relatives methods, Laspeyre’s and Paasche’s indices, and important indices like the CPI, WPI, IIP and Sensex.

What is the difference between Laspeyre’s and Paasche’s price index?

Both are weighted aggregative price indices; they differ only in the weights. Laspeyre’s index uses base-period quantities (q₀) as weights, while Paasche’s index uses current-period quantities (q₁) as weights. Because the baskets differ, the two usually give different values.

How is the Consumer Price Index (CPI) used to find the purchasing power of money and real wage?

The purchasing power of a rupee = 100 / CPI, so a higher CPI means lower purchasing power. The real wage = (money wage / CPI) × 100, which shows the actual value of income after adjusting for the change in the cost of living.

← Chapter 6: Correlation Statistics for Economics (all chapters) Chapter 8: Use of Statistical Tools →
Scroll to Top