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Worked Examples · Example 1
Q.

The base-year (2020) and current-year (2024) prices of four commodities consumed by a household are given below. Compute the Simple Aggregate price index number for 2024, taking 2020 as the base year.

CommodityPrice in 2020 (p0p_0), Rs.Price in 2024 (p1p_1), Rs.
Rice (per kg)3045
Wheat (per kg)2535
Sugar (per kg)4055
Cooking Oil (per litre)120150
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13% · 1/8 Questions
✓ Free question

The Simple Aggregate Method compares the sum of current-year prices to the sum of base-year prices:

P01=Σp1Σp0×100P_{01}=\dfrac{\Sigma p_1}{\Sigma p_0}\times100

First add the base-year (2020) prices of all four commodities:

Σp0=30+25+40+120=215\Sigma p_0 = 30+25+40+120 = 215

Then add the current-year (2024) prices of the same four commodities:

Σp1=45+35+55+150=285\Sigma p_1 = 45+35+55+150 = 285

Substituting into the formula:

P01=285215×100=132.56P_{01}=\dfrac{285}{215}\times100 = 132.56

Since the base year's own index is always 100, an index of 132.56132.56 means prices have risen by 132.56−100=32.56%132.56-100=32.56\% on average, as measured by this method, from 2020 to 2024.

✓Final answer

P01=132.56P_{01} = 132.56 — a 32.56% rise in the general price level from 2020 to 2024.

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