Question 18 of 19intermediate🔧 ApplyEssay4 marks

Record the daily expenditure, quantities bought and prices paid per unit of the daily purchases of your family for two weeks. How has the price change affected your family?

Correct Answer

To answer this question, I have recorded the daily expenditure of my family for two weeks:

Week 1 Data:

ItemQuantityPrice/Unit (Rs)Expenditure (Rs)
Cereals5 kg40200
Vegetables2 kg3060
Milk7 litres25175
Eggs1 dozen6060
Fuel5 kg50250

Week 2 Data (with price changes):

ItemQuantityPrice/Unit (Rs)Expenditure (Rs)
Cereals5 kg45225
Vegetables2 kg3570
Milk7 litres28196
Eggs1 dozen7070
Fuel5 kg55275

Impact of Price Changes on Family:

The price increase has affected our family in the following ways:

  1. Total expenditure increased from Rs 745 in Week 1 to Rs 836 in Week 2, an increase of Rs 91 (about 12%).

  2. Reduced purchasing power: To maintain the same expenditure level, we had to reduce consumption of certain items like vegetables and eggs.

  3. Budget reallocation: More money is now spent on essential items like cereals and fuel, leaving less for miscellaneous items.

  4. Cost of living impact: As mentioned in the chapter, the Consumer Price Index (CPI) or cost of living index helps us understand such changes. When prices rise, the family's real income decreases, affecting our standard of living.

  5. Need for adjustment: Families may need to negotiate wages or adjust spending patterns, as CPI numbers are used in wage negotiation and formulation of income policy.

Exercise: EXERCISES | Q: 20 | (Page Page 14)
For More Understanding

Explanation

This is a practical question requiring students to collect real data from their families. The answer demonstrates how to record daily purchases systematically and analyze the impact of price changes. Students should understand that price increases reduce purchasing power and affect the family's budget allocation. The context mentions that CPI helps in understanding cost of living changes and is used for wage negotiation and policy formulation.

Solution Steps

  1. Step 1: Create a table recording daily items, quantities, prices and total expenditure for Week 1

  2. Step 2: Record the same data for Week 2 noting any price changes

  3. Step 3: Calculate total expenditure for each week

  4. Step 4: Compare the difference and analyze impact on family budget

  5. Step 5: Discuss how price changes affect purchasing power and standard of living

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