Question

If the average disposable income of family of a class is ₹ 25000 in the year 2014 and if the cost of living index number of that class for the year 2016 with the base year 2014 is 120, estimate the average disposable income of the family of that class in the year 2016.

Answer 1

The average disposable income of family of a class = ₹ 25000 in the year 2014.

Base year is 2014. So the cost of living index number for the year 2014 = 100.

Cost of living index number for the year 2016 = 120.

Now, if the index number is 100, then the average disposable income is = ₹ 25000.

∴ If the index number is 120,

then the average disposable income = \(\frac{25000×120}{100} = ₹ 30000\)