Question

the cost of living index number and average monthly wage from the year 2010 to 2013 are give as follows. Find the real wage for each year.
Year Average monthly wage (₹)
2010 35,000
2011 40,000
2012 42,000
2013 50,000
cost of living index number
120
150
130
160​

Answer 1

The real wages are 4235000/-, 6040000/-, 5502000/-, 8050000/-.

• Real income, also known as real pay when referring to an individual's income, is the amount of money that an individual or entity makes after taking inflation into account. To have the best knowledge of their purchasing power, people frequently closely monitor the difference between their nominal and actual income.
• Real income is an economic metric that estimates a person's actual purchasing power on the open market after taking inflation into account. It takes a dollar's worth of economic inflation out of a person's income, which often results in a lower value and less purchasing power.

Here, according to the given information, it is given that,

Year Average monthly wage (₹)

2010 35,000

2011 40,000

2012 42,000

2013 50,000

Also, it is given that,

Cost of living index number

120

150

130

160​

Then, the real wage is calculated as,

Wages × (1 + cost of living index number) = Real wages.

Real wage for 2010 = $35000.(1+120) = 4235000$/-

Real wage for 2011 = $40000(150+1) = 6040000$/-

Real wage for 2012 = $42000.(130+1)=5502000$/-

Real wage for 2013 = $50000.(160+1) = 8050000$/-

Hence, the real wages are 4235000/-, 6040000/-, 5502000/-, 8050000/-.

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