Question

The rate of increase of the price of sugar is observed to be two percent more than the inflation rate expressed in percentage. The price of sugar, on January 1, 1994 is Rs. 20 per kg. The inflation rates of the years 1994 and 1995 are expected to be 8% each. The expected price of sugar on January 1, 1996 would be
A.Rs. 23.60
B.Rs. 24
C.Rs. 24.20
D.Rs. 24.60

Answer 1

Answer:

(c) Rs 24.20

Step-by-step explanation:

Pirce at 1 Jan 1994 = Rs 20 per kg

Find the price on 1 Jan 1995:

Inflation = 8%

Increase in price of sugar = 2 + 8 = 10%

Increase in price = 10% of Rs 20  = 0.1 x 20 = Rs 2

New Price = 20 + 2 = Rs 22

Find the price on 1 Jan 1996:

Inflation = 8%

Increase in price of sugar = 2 + 8 = 10%

Increase in price = 10% of Rs 22 = 0.1 x 22 = Rs 2.2

New price = 22 + 2.2 = Rs 24.20

Answer: (c) Rs 24.20