What do you understand by the term CPI?
¨ It measures the amount of commodities and services a given sum of money can buy.
¨ Also known as purchasing power or internal value of money.
¨ General Price changes will affect the value of money.
Definition: CPI is a figure that measures the relative changes in the general price level from a base year to a current year.
Steps Involved in the Calculation of the CPI
i. Selection of a base year
ii. Selection of a basket of commodities and services.
iii. Gather information on prices for base year and current year.
iv. Assign weights to each good and service according to their relative importance.
v. Calculate relative price changes between base year and current year and multiply this by the weights.
vi. Total the amount (i.e. relative prices x weights) and divide it by the total weights.
Illustration
Items
(per kg)
Prices
Relative prices
Weight
X weight
Yr 1
Yr 2
A
B
C
1.00
3.00
5.00
1.80
4.50
6.30
100
180
150
126
6
3
1
600
300
1080
450
10
1000
1656
Weighted price index for Yr 1 = 100
Weighted price index for Yr 2 = 165.6
Importance of CPI
Price indices are of importance to the government, firms and traders and to the trade union.
i. The Government use these indices as denominator to measure other economic indictors such as :-
ii. Firms and traders use these indices to adjust their profit margin especially when cost of production changes.
iii. Trade Union uses these indices in their wage negotiation with the employers.
Problems Involve in the Construction of CPI
¨ Difficulty in choosing a base year
¨ Difficulty in assigning weights to each commodity according to their relative importance since these weights change from time to time
¨ As taste and preference change from time to time, it is misleading to assume that the same amount will be spent
¨ Difficulty involve in the collection of accurate information on household expenditure pattern as people resent to such enquiries
¨ Difficult to include all range, grades or quality of goods in the market
Email based consumer price index assignment help - consumer price index homework help at TutorsGlobe
Are you searching economics tutor for help with Consumer Price Index questions? Consumer Price Index topic is not easier to learn without external help? We at www.tutorsglobe.com offer finest service of economics homework help and economics homework help. Live tutors are available for 24x7 hours helping students in their Consumer Price Index related problems. We provide step by step Consumer Price Index question's answers with 100% plagiarism free content. We prepare quality content and notes for Consumer Price Index topic under economics theory and study material. These are avail for subscribed users and they can get advantages anytime.
Why TutorsGlobe for Consumer Price Index homework help
tutorsglobe.com clinical psychology assignment help-homework help by online humanities tutors
Concept of Adjacency Matrix including the key concepts of Adjacency List, Implicit Representation, Assignment help and Homework help
tutorsglobe.com place of financial management in organization assignment help-homework help by online financial management tutors
Theory and lecture notes of Determining the type of test all along with the key concepts of Determining the type of test, Left Tailed Test, Right Tailed Test and Two Tailed Test. Tutorsglobe offers homework help, assignment help and tutor’s assistance on Determining the type of test.
www.tutorsglobe.com offers dynamical system homework help, dynamical system assignment help, online tutoring assistance, math solutions by online qualified tutor's help.
Ecology tutorial all along with the key concepts of concepts and Principles in Ecology, Ecosystem, Community, Population, Habitat, Factors which influences in an Ecosystem
tutorsglobe.com experiments on photosynthesis assignment help-homework help by online factors affecting photosynthesis tutors
Perissodactyla-Chiroptera-Insectivora tutorial all along with the key concepts of Order Perissodactyla, Features of Order Chiroptera and Features of Order Insectivora
tutorsglobe.com fruit assignment help-homework help by online flowers fruits and seeds tutors
Biology of cytology-genetics-Physiology tutorial all along with the key concepts of Introduction to cytology, Significance of Cell Biology, Introduction to genetics, Significance of Genetics and General Physiology
tutorsglobe.com pituitary gland assignment help-homework help by online co-ordination systems tutors
Determination of concentration of substance tutorial all along with the key concepts of Experiment, Requirements, Procedure, Procedure, Results, Treatment of results
tutorsglobe.com difference between particle and wave assignment help-homework help by online dual property of an electron tutors
Isolation Mechanisms tutorial all along with the key concepts of Morphological species concept, Biological species concept, Pre-zygotic, Temporal isolation, Mechanical isolation, Post-zygotic isolation and Genetics of isolation barriers
Detector is also termed as second detector or demodulator. It is employed among audio amplifier and IF amplifier. Crystal diode is employed in it.
1935123
Questions Asked
3689
Tutors
1480649
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!