If a basket of commodities cost N120 in the base year and N240 in the current year, calculate the price index

Answer Details

To calculate the price index, we need to compare the cost of the basket of commodities in the base year and in the current year. The formula for the price index is: Price index = (Cost of basket in current year / Cost of basket in base year) * 100 Using this formula: Price index = (N240 / N120) * 100 = 200 So, the price index is 200. In simple terms, the price index measures how much the cost of a basket of goods has changed over time. A price index of 200 means that the cost of the basket of goods has increased by 100% from the base year to the current year.