If the salary of a person in the base year is Rs 4,000 per annum and the current year salary is Rs 6,000, by how much should his salary be raised to maintain the same standard of living if the CPI is 400?
Rs 10,000
Explanation
The textbook demonstrates that to maintain the same standard of living when prices rise, the salary must be adjusted proportionally to the Consumer Price Index (CPI). The method shown in the context multiplies the base period salary by the factor (CPI/100) to find the required current salary. This ensures the purchasing power remains equivalent to the base year. The difference between the required salary and the current salary indicates how much the salary needs to be raised.
Solution Steps
Step 1: Calculate the salary required to maintain the same standard of living. Required Salary = Base Year Salary × (CPI/100) Required Salary = Rs 4,000 × (400/100) Required Salary = Rs 4, = Rs 16,000
Step 2: Calculate the amount by which salary should be raised. Raise Needed = Required Salary – Current Salary Raise Needed = Rs 16,000 – Rs 6,000 = Rs 10,000
Conclusion: The salary should be raised by Rs 10,000 to maintain the same standard of living as in the base year.