Question

Cost of Living Index Numbers for the years 2000 and 2005 are 120 and 220, respectively. If a person has monthly earnings of ₹10,800 in year 2000, what should be his monthly earnings in year 2005 in order to maintain same standard of living?

Answer 1

For the year 2000,

CLI = 120 and income = ₹ 10,800

Now, Real income = `("Income")/("CLI")xx100`

=`(10,800)/120xx100`

∴ Real Income = 9000

This shows that the real income is ₹ 9,000

For the year 2005,

CLI = 220

Real income = `("Income")/("CLI")xx100`

`9,000 = "Income"/220xx100`

∴ Income = 19,800

∴ Monthly earnings in year 2005 should be ₹ 19,800