Question

A representative consumer had to spend Rs 1400 on purchase of a given basket of commodities in the year 2015-16. Due to inflation CPI of the year 2019-20(taking 2015-16 as base year) was Rs120. how much amount the consumer had to spend on purchase of the same basket of commodities in the year 2019-20​

Answer 1

You can always take the average inflation of 7-8% in a developing country like India.

Answer 2

The consumer had to spend Rs 1680 on purchase of the same basket (basket of commodities in the year 2015-16) of commodities in the year 2019-20​

Consumer price index (CPI) = [Cost of the basket in the current year/Cost of the basket in the base year] x 100

Cost of the basket in the base year - Rs. 1400

Consumer price index = Rs.120

Let, Cost of the basket in the current year - Rs x

∴ CPI = (x/1400)*100

⇒120 = (x/1400)*100

⇒120*14 = x

⇒1680 = x

CPI is used to measure inflation