Inflation

For 8th Std Students

Milk Prices

1980- Rs 4 per lt.

2014 Rs 38 per lt.

Potato Prices

1980- Rs 4 per lt.

2014 Rs 22 per lt.

Petrol Prices

1980- Rs 5 per lt.

(approx)
2014 Rs 70 per lt.

Have you ever wondered why

prices are rising ?

We need some many items for every

day living

If any one of these items becomes

scarce, it affects every other item

If Land become scarce

Rent Increases or House prices increase
Workers working in Milk Diary demand more
Salary
Milk Diary increases the prices of Milk
Every other workers ask for increase because
now Milk and Rent have become more
expensive
Finally every thing becomes higher

If petrol becomes scarce

Bus Transport company increases Ticket prices
Workers traveling by Bus to Milk Diary ask for
Salary increase
Milk Prices are increased
Now every one buying Milk in the city ask for
Salary increase
Every other goods prices increase because
now every company has to give salary
increase

Inflation Spiral

It is not necessary that all prices will

increase
1999

2014

Rs 16 per min
Rs 0.5 per minute cost of
cost of out going out going call
call

Rs 6000 One
way Bangalore Mumbai

Rs 2500 One way

Bangalore Mumbai

Rs 40000 cost
of basic model
computer

Rs 20000 cost of basic

model computer

Even if prices of some

goods/services are falling, increase
in price of 1 or 2 items can push the
over all cost of our living expenses

How is inflation measured?

Increase in Inflation can measured by the
number Cost Inflation Index (CII)
Every year around June Income Tax
Department Publishes the figure Cost
Inflation Index for the particular year which
can be used for measuring inflation

How much is the increase in prices due

to Inflation?
Year
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97

CII

Year
100 1997-98
109 1998-99
116 1999-00
125 2000-01
133 2001-02
140 2002-03
150 2003-04
161 2004-05
172 2005-06
182 2006-07
199 2007-08
223 2008-09
244 2009-10
259 2010-11
281 2011-12
305 2012-13

CII

Year
331 2013-14
351 2014-15
389
406
426
447
463
480
497
519
551
582
632
711
785
852

CII
939
1024

If a family were able to

manage their expenses
with Rs 100 in 1981-82
they will need Rs 1024
In 2014-15

Sample Problems
1981-82

2005-6

2014-15

Cost Inflation Index

100

497

1024

Cost of 1 Lt of Milk

Rs 4

Rs 18

Rs 38

Cost of 1 Lt of
Petrol

Rs 5

Rs 40

Rs 70

School Fees per

year

Rs 1000

Rs 15000

Rs 60000

Q1. If milk prices were to increase exactly in line with inflation what should be
the cost of milk in 2014 compared to 1981-82?
Q2. Which of the above goods services (Milk, Petrol, School Fees saw
Steepest increased more than inflation between 1981-82 and 2005-06?

Sample Problems
1981-82

2005-6

2014-15

Cost Inflation Index

100

497

1024

Cost of 1 Lt of Milk

Rs 4

Rs 18

Rs 38

Cost of 1 Lt of
Petrol

Rs 5

Rs 40

Rs 70

School Fees per

year

Rs 1000

Rs 15000

Rs 60000

Q1. If milk prices were to increase exactly in line with inflation what should be
the cost of milk in 2014 compared to 1981-82? Ans: (1024/100)*4 = Rs 40.96
Q2. Which of the above goods services (Milk, Petrol, School Fees saw
Steepest increased more than inflation between 1981-82 and 2005-06?
Actual Price of Milk inline with inflation should be : (497/100)*4 = Rs 19.88
Actual Price of Petrol inline with inflation should be : Rs 24.85
Actual Price of School Fees in line with inflation should be : Rs 4970
Hence School Fees and Petrol increased more than inflation

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