What Is Consumer Price Index?
Answer:
The most widely used measure of inflation is the consumer price index, also known s the consumer price index. The consumer price index measures the cost of buying a standard basket of merchandise at different times. The market basket includes prices of food, clothing, shelter, fuel, transportation, medical care, college tuition, and other produce and services purchased for day-to-day living. Prices on 364 separate classes of goods and services are collected from over 21,000 establishments in 91 areas of the country.
In the case of the consumer price index, respectively item is assigned a fixed weight proportional to its relative importance in consumer expenditure budgets, the weights for respectively item are proportional to the total spending by consumers on that item as determined by a survey of consumer expenditures in the 1982 to 1984 period. As of December 1996, housing related costs were the single biggest category surrounded by the consumer price index, taking up more than 40 percent of consumer spending budgets. By comparison, the cost of new cars and other motor vehicles accounts for only 5 percent of the consumer price indexes consumer expenditure budgets.
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