The rate of increase of the price of sugar is observed to be two percent more…
2024
The rate of increase of the price of sugar is observed to be two percent more than the inflation rate expressed in percentage. The price of sugar, on January 1, 1994 is Rs. 20 per kg. The inflation rates of the years 1994 and 1995 are expected to be 8% each. The expected price of sugar on January 1, 1996 would be
- A.
Rs. 23.60
- B.
Rs. 24
- C.
Rs. 24.20
- D.
Rs. 24.60
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Show answer & explanation
Correct answer: C
This is a successive percentage-change question.
Rule: If a value increases by r% each year for n years, multiply the original value by (1 + r/100)ⁿ.
Here, sugar increases 2% more than the inflation rate.
Inflation rate = 8%
Sugar price increase = 8% + 2% = 10% per year
From January 1, 1994 to January 1, 1996, there are two annual increases: 1994 and 1995.
Price on January 1, 1996 = 20 × (1.10)²
= 20 × 1.21
= 24.20
TCS tip: Do not add 10% + 10% as a simple 20% increase on the original price. The second 10% is applied on the increased price after the first year.
Answer: Rs. 24.20