If the same basket of goods which cost N12.00 in 1985 cost N15.00 in 1987, price index for 1987 is?

Answer Details

If the same basket of goods which cost N12.00 in 1985 cost N15.00 in 1987, the price index for 1987 is 125. A price index is a measure of the average price of a basket of goods over time, expressed as a percentage of the price in the base year. To calculate the price index, we divide the price of the basket of goods in the current year by the price of the same basket of goods in the base year and multiply by 100. In this case, the base year is 1985, and the current year is 1987. The price of the basket of goods in 1985 is N12.00, and the price of the same basket of goods in 1987 is N15.00. So, the price index for 1987 can be calculated as follows: Price index for 1987 = (Price of basket of goods in 1987 / Price of basket of goods in 1985) x 100 Price index for 1987 = (N15.00 / N12.00) x 100 Price index for 1987 = 1.25 x 100 Price index for 1987 = 125 To put it simply, the price index is a measure of the average price of a basket of goods over time. To calculate the price index, we divide the price of the basket of goods in the current year by the price of the same basket of goods in the base year and multiply by 100. In this case, the price index for 1987 is 125 because the price of the same basket of goods increased from N12.00 in 1985 to N15.00 in 1987.