Topic 10 – Index Numbers

1. Price index, I is given by Q1: The price of the house Sulaiman bought in the year 1998
P was RM110000. In the year 2000, the price of the house went up
I = 1 × 100 to RM130000. Calculate the price index of the house for the year
P0
2000 based on the year 1998.
P0 - price at the base time
P1 - price at the specific time
Example 1:
The price of a tube of facial cleanser in the year 2018 and 2020
were RM18.00 and RM20.00 respectively. Find the price index of
the cleanser for the year 2020 based on the year 2018.

Solution:
Price index for the year 2020 based on the year 2018.
Price at a specific time
I= × 100
Price at the base time
Price in the year 2020
= × 100
Price in the year 2018
118.18
P
= 2020 × 100 Q2: The prices of a plastic chair in the year 1999 and 2001 were
P2018
RM8.40 and RM9.20 respectively. Calculate the price index of
20.00 the plastic chair for the year 2001 based on the year 1999.
= × 100
18.00
= 111.11

Example 2:
The price index of a brand of digital watch for the year 2001
based on the year 2000 is 110. If the price of the watch in the
year 2000 was RM52.00, calculate its price in the price 2001.
P2001
× 100 = 110
P2000
P2001
× 100 = 110
52
110 × 52
P2001 =
100
= 57.20 109.52
Q3: The price index of a tin of pineapple syrup for the year 2000
Example 3: based on the year 1998 is 130. Calculate the price of the tin of
Based on the year 1998, the index numbers of a type of petrol syrup in the year 2000 if its price in the year 1998 was RM6.80
for the years 1999 and 2000 are 120 and 150 respectively. Find
the index number for the year 2000 based on the year 1999.

P1999 P2000
× 100 = 120 × 100 = 150
P1998 P1998
P1999 120 P2000 150
= =
P1998 100 P1998 100

P2000 P P
× 100 = 2000 × 1998 × 100
P1999 P1998 P1999
150 100
= × × 100
100 120
= 125

RM8.84
 Q4: The price of a bottle of cooking oil in the year 1999 was Q7
RM15.00. Given that the price index for the year 2000 based on Price index in
the year 1999 is 105, calculate the price of the cooking oil in the Item Price in 2013 Price in 2015 2015
year 2000. (2013 =100)
R P0 RM15 150
Q RM8 P1 125

RM15.75 P0 = 10 P1 = 10
Q5: Based on the year 1995, the index number of an oven for the Q8
years 1998 and 2001 are 110 and 130 respectively. Find the Price index in
index number for the year 2001 based on the year 1998. Item Price in 2014 Price in 2016 2016
(2014 =100)
A RM2.50 P1 120
B P0 RM5.00 125

118.18 P0 = 4 P1 = 3
Q6: The index number of a DVD player for the year 1999 is 120 Q9
based on the year 1996. The index number for the year 2002 is Price index in
130 based on the year 1999. Find the index number for the year Item Price in 2013 Price in 2015 2015
2002 based on the year 1996. (2013 =100)
E P0 RM4 80
F RM2 P1 140

156 P0 = 5 P1 = 2.80
Q10: Q13:
Price index in Price index in Price index in Price index in
Material Price in 2015 Price in 2016 2016 Item 2008 2009 2009
(2015 =100) (2007 = 100) (2007 = 100) (2008 =100)
P RM0.80 RM1.00 x A 120 132 h
Q RM2.00 y 140 B 125 k 120
R z RM0.40 80

x = 125 y = RM2.80 z = RM0.50 h = 110 k = 150

Q11: Q14:
Price index in Price index in Price index in Price index in
Component Price in 2010 Price in 2015 2015 Item 2013 2015 2015
(2010 =100) (2011 = 100) (2011 = 100) (2013 =100)
P x RM2.20 110 P 124 155 h
Q RM1.20 y 125 Q k 175 140
R RM3.00 RM2.70 z

x = RM2.00 y = RM1.50 z = 90 h = 125 k = 125

Q12: Q15
Price index in Price index in Price index in Price index in
Ingredient Price in 2011 Price in 2013 2013 Item 2003 2005 2005
(2011 =100) (2001 = 100) (2003 = 100) (2001 =100)
Flour RM1.50 RM1.80 x M 120 135 h
Salt y RM0.90 112.5 N k 120 138
Sugar RM1.40 z 105

x = 120 y = RM0.80 z = RM1.47 h = 162 k = 115

2. Composite Indices Example 3:
Composite Index, I , is given by The following table shows the price indices of the four
ΣIW components, P, Q, R, S that are needed to make an electronic
I= equipment for the year 2001 based on the year 1996 and their
ΣW
I = Price index or index number respective weightages.
W = weightage
Component Price index Weightage
Example 1: P 110 2
The following table shows the price indices of the fruits sold at a Q 130 2
stall for the year 2000 based on the year 1999 and their R 120 5
respective weightages. S 150 1
a) Calculate the composite index for the year 2001 based on
Fruit Price index Weightage the year 1996
Mango 120 3 b) Given that the price of the electronic equipment in the year
Rambutan 105 2 1996 was RM230, calculate its price in the year 2001.
Durian 115 4
Banana 110 1 Solution:
Calculate the composite index for the year 2000 based on the a)
year 1999. ΣIW
I=
ΣW
Solution: (110 × 2) + (130 × 2) + (120 × 5) + (150 × 1)
=
Composite index for the year 2000 based on the year 1999 2+2+5+1
ΣIW 1230
I= =
ΣW 10
(120 × 3) + (105 × 2) + (115 × 4) + (110 × 1) = 123
=
3+2+ 4 +1 b)
1140 P2001
= × 100 = 123
10 P1996
= 114 P2001
× 100 = 123
230
Example 2: 230 × 123
The following table shows the price indices of a few items P2001 =
100
produces by a company for the year 2001 based on the year
= 282.90
2000 and their respective weightages.

Item Price index Weightage

A 130 5
B 150 6
C p 7
D 120 2
If the composite index for the year 2001 based on the year 2000
is 138.5, find the value of p.
Solution:
ΣIW
I=
ΣW
ΣIW
138.5 =
ΣW
(130 × 5) + (150 × 6) + (p × 7) + (120 × 2)
138.5 =
5+6+7+2
1790 + 7p
138.5 =
20
1790 + 7p = 2770
7p = 2770 − 1790
p = 140
Calculate the composite index for each of the following:
Q1: Q4:Calculate composite index in the year 2016 based on year
Material Price index Weightage 2014
E 90 2 Item Price in 2014 Price in 2016 Weightage
F 144 5 A RM4.00 RM5.00 4
G 102 2 B RM3.00 RM4.50 3
H 112 3 C RM8.00 RM10.00 12
D RM2.50 RM3.00 6

120 126.8
Q2: Q5: Calculate composite index in the year 2016 based on year
Drink Price index Weightage 2014
P 125 4 Item Price in 2014 Price in 2016 Weightage
Q 140 3 R RM3.00 RM4.20 1
R 150 5 S RM1.50 RM1.80 3
S 80 8 T RM0.80 RM0.90 4
U RM1.40 RM1.47 2

115.5 116
Q3: Q6: Calculate composite index in the year 2016 based on year
Food Price index Weightage 2014
A 135 40% Item Price in 2014 Price in 2016 Weightage
B 125 30% E RM3.00 RM2.70 2
C 105 10% F RM0.60 RM0.90 4
D 130 20% G RM2.00 RM2.50 6
H RM0.50 RM0.40 3

128 118
Q7: Calculate the composite index for each of the following. Q9: : Calculate the composite index for each of the following.
Item Price index in 2009 ( 2005 = 100) Fuel Price index in 2009 ( 2005 = 100)
A 125 P 105
B 140 Q 120
C 150 R 110
D 80 S 90

120 111
Q8: Calculate the composite index for each of the following. Q10: Calculate the composite index for each of the following
Material Price index in 2010 ( 2005 = 100) expenditure
E 130 Ingredient Price in 2012 Price in 2016
(%)
F 85 K RM4.00 RM4.20 16
G 140 L RM3.00 RM4.50 12
H 110 M RM2.50 RM3.00 48
N RM2.00 RM1.80 24

113 114
Find the value of m in each of the following given the composite index.
Q1: Q3:
Transport Price index Weightage Food Price index Weightage
Taxi 110 3 Chicken rice 155 4
Bus 105 4 Nasi Lemak m 5
Train 80 m Laksa 145 4
Car 120 1 Nasi Ambang 140 7
Given composite index = 103 Given composite index = 139

2 120
Q2: Q4:
Hot drink Price index Weightage Electrical Price index Weightage
Milo 120 7 appliances
Coffee 160 3 Radio 120 4
Tea 125 m Television 125 6
Nescafe 110 2 Rice cooker m 2
Given composite index = 127.5 Refrigerator 130 8
Given composite index = 128

4 145