CONSUMER PRICE IND

-F.Y.M.M.S.

What is Consumer Price Index?

The consumer price index (CPI) is a measure of the overall cost of the goods and services bought by a typical consumer.

The Bureau of Labour Statistics reports the CPI each month. It is used to monitor changes in the cost of living over time. Various samples combined to produce the Consumer Price Index Used as a measure of Inflation Shows the real value of Wages and Salaries

How the Consumer Price Index Is Calculated?

Fix the Basket Determine what prices are most important to the typical consumer. Find the prices. Choose a base year and compute the index. Designate one year as the base year, making it the benchmark against which other years are compared. Compute the index by dividing the price of the basket in one year by the price in the base year and multiplying by 100.

Formula:-

Consumer price index = Price of basket of goods and services 100 Price of basket in base year

What is the relationship between CPI and inflation?

CPI is the indicator of inflation in any country. If CPI is high it means inflation is high.

History of CPI:-

WPI in India
What is WPI?

CPI in India

A Small Graph:

To assess the economic landscape and primarily inflation Deflator for economic series Calculate real consumer income

Uses of CPI

Federal pension benefits

Social security

Coverage i s limited

It measures partially inflation not total consumers expenditure .

Bias due to product selection

Limitatio ns of CPI

Bias due to quality improvemen t

Prices may have different tre nd in rural & urban centres