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 Index number

CHAPTER 11 : INDEX NUMBER

11.1 Index Number

Q1
1. Index number, I 100 where Q0 = quantity at base time
Q2
Q1 = quantity at specific time

2. Price index, P1 where P0 = price of item at base time

I 100
P2 P1 = price of item at specific time

Calculating Price Index

1. Find the price index for the following items for the year 2007 based on 2006.
Example: (a)

Year Price of item (RM) Year Price of item (RM)

2006 4 2006 50
2007 5 2007 60

Q1 5
I 100  100
Q2 4
 125
[120]
(b) (c)
Year Price of item (RM) Year Price of item (RM)
2006 0.80 2006 200
2007 1.20 2007 245

[150] [122.5]

(d) (e)
Year Price of item (RM) Year Price of item (RM)
2006 24.00 2006 2.50
2007 27.60 2007 3.50

[115] [140]
 Index number

2. Find the following price indices:

Example: (a)
Year Price(RM) Year Price(RM)
2003 200 2002 40
2005 300 2005 44
2007 360 2007 70

(a) Price index for the year 2005 (a) Price index for the year 2005
(based on 2003) (based on 2002)
300 I1 
I1  100  150
200
(b) Price index for the year 2007 (b) Price index for the year 2007
(based on 2003) (based on 2002)
I1 
360
 100  180 I1 
200
(c) Price index for the year 2007 (c) Price index for the year 2007
(based on 2005) (based on 2005)
I1 
360
100  120 I1 
300
[(a)110 (b)175 (c)159.1]

(b) (c)
Year Price(RM) Year Price(RM)
2003 2.00 2000 350
2004 2.40 2003 410
2006 3.60 2007 450

(a) Price index for the year 2004 (a) Price index for the year 2003
(based on 2003) (based on 2000)
I1  I1 

(b) Price index for the year 2006 (b) Price index for the year 2007
(based on 2003) (based on 2000)
I1  I1 

(c) Price index for the year 2006 (c) Price index for the year 2007
(based on 2004) (based on 2003)
I1  I1 

[(a)120 (b)180 (c)150] [(a)117.1 (b)128.6 (c)109.8]

 Index number

3. Calculate the index number for the following questions:

Example: Given (a) Given

Item Price in Price Price index Item Price in Price Price index
2000 in in 2007 2000 in in 2007
(RM) 2007 based on (RM) 2007 based on
(RM) 2000 (RM) 2000
A 4.00 4.40 x A 5.00 4.50 x
B 5.00 6.00 y B 6.00 6.60 y

4.40
x  100  110
4.00
6
y   100  120
5

[x=90,y=110]
(b) Given (c) Given

Item Price in Price Price index Item Price in Price Price index
2005 in in 2007 2003 in in 2006
(RM) 2007 based on (RM) 2006 based on
(RM) 2005 (RM) 2003
A 24.00 30.00 x A 4.80 6.00 x
B 25.00 24.00 y B 6.00 4.80 y

[x=125,y=96] [x=125,y=80]

4. Calculate the price index for the following questions:
Example:
The price of a plate of chicken rice at a
school canteen increased from RM2.40 in
the year 2000 to RM3.60 in the year 2005.
Calculate the price index of a plate of
chicken rice for that school canteen in the
year 2005 based on the year 2000.
3.00
I  100  125
2.40
(b)
The prince of a single storey link house at a
certain locality increased fromRM150,000
in the year 1995 to RM180,000 in the year
2005. Calculate the price index of a single
storey link house in that locality in year
2005 based on the year 1995.
[120]
(d)
The price of a kg of sugar was RM1.50 in
1998. The price increased to RM1.80 in the
year 2000 and RM2.25 in the year 2002.
Calculate the price index of a kg of sugar
(i) in year 2000 based on 1998
(ii) in year 2002 based in 2000
[(a) 120 (b) 125]
Index number
(a)
The price of 1kg of squid in the year 2001
was RM8.00. in the year 2006, it was
RM10.80 per kg. Calculate the price index
of a kg of squid in the year 2006 based on
the year 2001.
[135]
(c)
The price of a packet of ‘nasi lemak’ in a
certain stall increased from RM0.50 in
2000 to RM1.20 in 2006. Calculate the
price index of a packet of ‘nasi lemak’ in
year 2006 based on year 2000.
[240]
(e)
The price of car X decreased from
RM33,750 in 2006 to RM27,000 in year
2007. Calculate the price index of car X in
year 2007 based on year 2006.
[80]
 Index number

5. Find the item price, Q1 , for the year 2007 based on the year 2000 for each of the
following:

Example: (a)

Year Item Price Price index Year Item Price Price index
(RM) (RM)

2000 50 2000 3.00

120 140
2007 Q1 2007 Q1

Q1
I  100
Q0
120  50
Q1   60
100 [RM4.20]

(b) (c)
Year Item Price Price index Year Item Price Price index
(RM) (RM)

2000 40 2000 0.80

125 120
2007 Q1 2007 Q1

[RM50] [RM0.96]
(d) (e)
Year Item Price Price index Year Item Price Price index
(RM) (RM)

2000 0.80 2000 1500

75 115
2007 Q1 2007 Q1

[RM0.60] [RM1725]
 Index number

11.2 Composite Index

Composite Index, I
IWi i
where I i = index number of the i th item,
W i
Wi = weightage of the i th item.

1. Calculate the composite index for each of the following:

Example: (a)
Food Price Index Weightage Drink Price Index Weightage
A 115 2 P 120 3
B 120 3 Q 145 4
C 140 5 R 160 5

(115  2)  (120  3)  (140  5)

I
235
 129 [145]
(b) Table below shows the price indices (c) Table below shows the price indiced
and the weightages of 4 items in year 2005 and the weightages of 4 ingredients used in
based on 2000. Calculate the composite making a certain type of biscuit in year
index of all the items in year 2005 based on 2004 based on 1998. Calculate the
2000. composite index of all the ingredients in
Items Price Index Weightage year 2004 based on 1998.
P 110 3 Items Price Index Weightage
Q 115 2 A 145 4
R 105 4 B 200 1
S 120 1 C 120 2
D 150 5
E 160 3

[110]
(d) Table below shows the price indices
and the weightages of 3 raw materials in
year 2005 based on 1999. Calculate the
composite index of all the items in year
2005 based on 1999.
[150]
(e) Table below shows the price indices
and the weightages of 3 items in year 2002
based on 2000. Calculate the composite
index of all the items in year 2002 based on
2000.

Items Price Index Weightage Items X Y Z

P 110 4 Index 110 120 80
Q 120 5 number
R 85 1 weightage 3 2 5

[112.5] [97]
 Index number

2. Calculate the composite index for each of the following:

Example: (a)
A B C commodities 2000 2007 weightage
Price in 3.00 4.80 5.70 A 5.00 6.00 4
2006 (RM) B 10.50 12.60 2
Prince in 2.50 1.20 5.00 C 8.00 9.80 1
2000 (RM) D 18.00 21.15 3
Weightage 1 3 2

3.00
IA   100  120
2.50
4.80
IB   100  400
1.20
5.70
IC   100  114
5.00
(120  1)  (400  3)  (114  2)
I
6
 258

[119.5]
(b)Table below shows the price of 5 types (c) Table below shows the price of 3 raw
of goods in the year 2000 and 2006 with materials A, B, and C in the year 2000 and
their corresponding weightages. Caculate 2006 with their corresponding weightages.
the composite index in 2006 based on Caculate the composite index in 2006
2000. based on 2000.
Goods Price in Prince Wieghtage Raw A B C
2000 in 2006 Materials
(RM) (RM) Price in 4.80 2.50 5.00
P 5 6 1 2000 (RM)
Q 20 23 2 Prince in 6.00 3.00 6.00
R 8 12 3 2006 (RM)
S 16 18 4 Weightage 2 5 3
T 10 13 5

[126.7] [121]
 Index number

3. Calculate the value of the unknown for each of the following based on the composite
index given.
Example: (a)
Drink Prince index weightage Raw Prince index weightage
A 121 5 materiali
B 130 6 A 155 1
C 105 n B 120 10
D 115 3 C 150 2
Given composite index is 118, find n. D 135 n
(121  5)  (130  6)  (105  n)  (115  3) Given composite index is 130,ind n.
 11
14  n
1730  105n  118(14  n)
1730  105n  1652  118n
13n  78
n6 [7]

(b)Table shows the price indices and their (c) Table shows the price indices and their
respective weightages of the items in year respective weightages of the items in year
2003 based on 2000. It is given that the 2000based on 1995 is given that the
composite index for the items for the year composite index for the items for the year
2005 based on 2000 is 121, find a. 2000 based on 1995 is 115, find b.
Index No 110 120 140 Index No 125 80 11
weightage 5 a 3 weightage 6 1 b

[2]
(d) Table shows the price indices and their
respective weightages of the items in year
2003 based on 1998. It is given that the
composite index for the items for the year
2003 based on 1998 is 112, find c.
[5]
(e) Table shows the price indices and their
respective weightages of the items in year
2005 based on 2000. It is given that the
composite index for the items for the year
2005 based on 2000 is 105.5, find x.

Index No 110 120 150 85 Index No 105 120 90 110

wieghtage 8 4 c 2 wieghtage 1 2 x x+1

[1] [3]
 Index number

Past Year Questions

1. SPM 2003 : Paper 2
The following diagram is a bar chart indicating the weekly cost of the items P, Q, R,
S, and T for the year 1990.The following table shows the prices and the price indices
for the items.

Weekly Cost (RM)

33
30

24

15
12

0
P Q R S T Items
Diagram

Items Price in 1990 Price in 1995 Price index in 1995

based on 1990
P x RM0.70 175
Q RM2.00 RM2.50 125
R RM4.00 RM5.50 y
S RM6.00 RM9.00 150
T RM2.50 z 120

(a) Find the value of

(i) x, [RM0.40]
(ii) y, [137.5]
(iii) z. [RM3.00]
(b) Calculate the composite index for the items in the year 1995 based on the year 1990.
[140.9]

(c) The total monthly cost of the items in the year 1990 is RM456.
Calculate the corresponding total monthly cost for the year 1995. [RM642.50]

(d) The cost of the items increases by 20% from the year 1995 to the year 2000. Find the
composite index for the year 2000 based on the year 1990. [169.1]
 Index number

2. SPM 2004 : Paper 2

The table below shows the price indices and percentage of usage of four items, P, Q,
R, and S, which are the main ingredients in the production of a type of biscuit.
Item Price index for the year 1995 based Percentage of usage (%)
on the year 1993
P 135 40
Q x 30
R 105 10
S 130 20

(a) Calculate
(i) the price of S in the year 1993 if its price in the year 1995 is RM37.70. [RM29]
(ii) the price index of P in the year 1995 based on the year 1991 if its price index
in the year 1993 based on the year 1991 is 120. [162]

(b) The composite index number of the lost of biscuit production for the year 1995
based on he year 1993 is 128.
(i) the value of x, [125]
(ii) the price of a box of biscuit in the year 1993 if the corresponding price in
the year 1995 is RM32. [RM25]

3. SPM 2005
The table below shows the prices and the price indices for the four ingredients
P, Q, R, and S, used in making biscuits of a particular kind. The diagram is a pie chart
which represents the relative amount of the ingredients P, Q, R, and S, used in making
these biscuits.

Ingredients Price per kg (RM) Price index for

the year 2004
Year Year
based on the year
2001 2004
2001
P 0.80 1.00 x
Q 2.00 y 140
R 0.40 0.60 150
S z 0.40 80

P
Q

120
60
100  S

R
 Index number

(a) Find the values of x, y and z. [ x = 125, y =2.80, z = 0.50]

(b) (i) Calculate the composite index for the cost of making these biscuits in the year
2004 based on the year 2001. [129.44]
(ii) Hence, calculate the corresponding cost of making these biscuits in the year 2001
if the cost in the year 2004 was RM2985. [RM2306.09]
(c) The cost of making these biscuits is expected to increase by 50% from the year 2004
to the year 2007.
Find the expected composite index for the year 2007 based on the year 2001.
[194.16]

4. SPM 2006

A particular kind of cake is made by using four ingredients, P, Q, R, and S. Table below
shows the prices of the ingredients.

Ingredient Price per kilogram (RM)

Year 2004 Year 3005
P 5.00 w
Q 2.50 4.00
R x y
S 4.00 4.40

(a) The index number of ingredient P in the year 2005 based on the year 2004 is 120.
Calculate the value of w. [6]
(b) The index number of ingredient R in the year 2005 based on the year 2004 is 125.
The price per kilogram of ingredient R in the year 2005 is RM2.00 more than its
corresponding price in the year 2004. Calculate the value of x and of y.
[x = 8, y=10]
(c) The composite index for the cost of making the cake in the year 2005 based on the
year 2004 is 127.5. Calculate
(i) the price of a cake in the year 2004 if its corresponding price in the year
2005 is RM30.60. [RM24]
(ii) the value of m if the quantities of ingredients P, Q, R, and S used are in the
ration of 7 : 3 : m : 2. [4]