An article currently costs Rs 50. If the general rate of inflation is 300% per year, assuming the price rises at this same rate every year, what will be the cost of this article, in rupees, after 2 years?

Introduction / Context:
This question is a real life style application of compound growth, where the rate of inflation plays the role of the interest rate. When inflation is very high, prices rise sharply each year, and this can be modeled using the same ideas as compound interest. Here, you are given an initial price, a very large inflation rate of 300% per year, and asked to predict the price after 2 years if this rate continues unchanged. The point is to see that a 300% increase per year means the price multiplies several times each year, not just by a small amount.

Given Data / Assumptions:

• Current price of the article (P) = Rs 50.
• Inflation rate = 300% per annum.
• Time period = 2 years.
• Price increase is assumed to compound yearly at the given rate.
• No other factors such as discounts or special taxes are considered.

Concept / Approach:
A 300% inflation rate means that every year the price increases by 300% of its current value. That is, the price becomes original price plus three times that price, which is four times the original. So each year, the price is multiplied by a factor of 4. Mathematically, for compound growth we can use:
Future price = Present price * (1 + r)^nHere r is expressed in decimal form. For 300% inflation, r = 3. So the yearly growth factor is (1 + 3) = 4. For 2 years, we apply this factor twice.

Step-by-Step Solution:
Step 1: Convert the inflation rate into a yearly multiplier. At 300% inflation, r = 300 / 100 = 3.Step 2: Compute the yearly growth factor: 1 + r = 1 + 3 = 4. So price each year becomes four times the previous year.Step 3: After 1 year, price = 50 * 4 = 200 rupees.Step 4: After 2 years, we again multiply by 4: price = 200 * 4 = 800 rupees.Step 5: Therefore, after two full years at 300% inflation per year, the article will cost Rs 800.

Verification / Alternative check:
Using the compound growth formula, we can write future price after 2 years as:
Future price = 50 * (1 + 300 / 100)^2 = 50 * (1 + 3)^2 = 50 * 4^2.Compute 4^2 = 16, so future price = 50 * 16 = 800.This agrees exactly with the stepwise multiplication approach and confirms that the final cost is Rs 800.

Why Other Options Are Wrong:
Rs.200 would be the price after only 1 year of 300% inflation, not after 2 years. Rs.600 and Rs.400 represent partial or incorrect growth factors and do not match the repeated multiplication by 4 each year. Rs.1000 is larger than the correct price and would require an even higher effective growth rate than 300% per year. Only Rs.800 reflects the correct two year compounding at 300% per annum.

Common Pitfalls:
A common mistake is to treat 300% as if it means the price becomes 300 rupees after two years, or to add 300% twice (giving 600%) and incorrectly compute 50 * (1 + 6) = 350. Another error is to forget that each year the increase is on the new price, not just on the original price. Recognizing that inflation works like compound interest and using a multiplication factor each year avoids these errors.

Final Answer:
After 2 years at an annual inflation rate of 300%, the price of the article will be Rs.800.