If the salary of a person in the base year is Rs. 2000 per annuli and in the current year Rs. 5000. The CPI is 325, then the allowance required to maintain the same standard of living is -

Solution

Base CPI = Rs. 100 Current CPI = Rs. 325 Base year salary = Rs. 2,000 Current year salary = Rs. 5,000 When base CPI is Rs. 100, then the salary is = Rs. 2,000 Current salary equivalent to base year salary = (Base year salary / 100) × CPI When CPI is 325, then the salary should be (2,000 / 100) × 325 = Rs.6,500 Thus, his salary should be Rs. 6,500 to maintain his purchasing power. Therefore, in the current year, the allowance required is Rs. 6,500 - Rs. 5,000 = Rs. 1,500 so as to maintain the same level of living in the current year as that of the base year.