Question

The Cost of Living Index Number for years 1995 and 1999 are 140 and 200 respectively. A person earns ₹ 11,200 per month in the year 1995. What should be his monthly earnings in the year 1999 in order to maintain his standard of living as in the year 1995?

Answer 1

For the year 1995,
CLI = 140 and income = ₹ 11200

Now, Real income = ${\displaystyle \frac{\text{Income}}{\text{CLI}}\times 100}$

= ${\displaystyle \frac{11200}{140}\times 100}$

∴ Real income =  8000
For the year 1999, CLI = 200

∴ Real income = ${\displaystyle \frac{\text{Income}}{\text{CLI}}\times 100}$

∴ 8000 = ${\displaystyle \frac{\text{Income}}{200}\times 100}$

∴ Income = ${\displaystyle \frac{8000\times 200}{100}}$
= 16000
In order to maintain the same standard of living as in 1995, income in 1999 should be ₹ 16,000.