[Commerce Class Notes] on Important Index Numbers Pdf for Exam

Consumer Price Index Number

The consumer price index number is used to examine the average weight of a price related to a group of products and services consisting of food, transportation as well as medical care. It measures an average change within prices that the customer is supposed to pay for the basket of products and services. Development in customer price index number is used to approach price changes correlated to the cost of living. The customer index number is an important statistic that is used to identify periods of deflation and inflation. It is also called an economic indicator.

Consumer Price Index Number for Industrial Workers

Consumer price index number for industrial workers is created to measure over time changes in prices regarding a given box of goods and services. This is absorbed by a specified population, in this case, industrial workers. The consumer index number is collected for all the industrial workers living in 70 centres within the industrial importance of the country. These specific 70 centres were given to all the states in proportion to industrial development. 

The indices of all the 70 centres are collected and released each month on the ground of weights acquired from working-class families. It is also on the ground of the expenditure survey organized between 1981 and 1982 and modern prices of the individual items which were taken away from 226 markets covered by 70 centres. Based on the 70 centres, the All-India Index is derived which is also a weighted average. 

Alongside, the Labour Bureau also collects and sends indices of other six centres for meeting the requirements of individual index users. Besides presenting serial data, the publication also has various other information like inflation rates, all-India items, linking factors for new and old series, etc.

The Different Uses of Consumer Price Index Number:

• The consumer price index number specifies the change in consumer price. Thus, it helps the government to formulate several policies concerning control of taxation, price, exports and import of all the commodities. 

• It is used to grant allowance and other propensities to the employees.

• It is also used to evaluate the purchasing power associated with money.

• It also compares changes regarding the coat of survival of various communities.

• The index number is also used to deflate data on wages, living, cost and national income.

• It also acts as an economic indicator like financial instruments and the cost of commodities.

• Acts as a policy formulator for international, state and national levels.

Consumer price index number is also known as the Cost of living index. It is a theoretical index that measures the differences in the price of services and goods to allow them as a substitution with the other items as the price varies. The consumer price index measures changes in the price level of services and consumer goods purchased by the households. The consumer price index is mostly used in measuring inflation as well as a proxy of the effectiveness of the government’s policies. 

Thus, to summarize, the consumer price index measures changes in:

1. Retail prices  

2. Producers prices

3. Wholesale prices

Consumer Price Index Number in Statistics

The formula includes CPTt, Ct, and Co

Where:

CPTt = consumer price index in the current period

Ct = cost of the market basket in the current period

C0 = cost of the market basket in the base period 

Important Index Numbers

Although there are a lot of index numbers, two of them are effectively important and used in various sections of society. They are – Wholesale Price Index (WPI) and Consumer Price Index (CPI).

Wholesale Price Index

WPI measures the temporary change in the wholesale price of commodities. The wholesale price index deals with the relative change in cost from the market’s perspective. It is an important index.

To calculate WPI, commodities should be classified into – 

1. Primary articles 

2. Fuel and power 

3. Manufactured goods

Consumer Price Index

CPI measures change in price given by definite buyers for consuming services and goods. It is also called the cost of the living index because of a change in cost levels affecting the different patterns which alter the living cost. It depicts the change in the price level. It also helps the government to develop fiscal policy and taxation policies. 

Did You Know?

• Consumer Price Index is mainly used to measure proxy and inflation efficiency of the economic policy of the government.

• The consumer index statistics cover the self-employed, professionals, retired, the poor, and unemployed population of the country. However, it omits rural or non-metro populations, armed forces, farm families and the ones serving in the prison and people in the mental hospitals.

• The CPI measures average changes in cost over time which buyers pay for baskets of services and goods.

• CPI-W measures CPI for the Clerical Workers and Urban Wage Earners and CPI-U means CPI for Urban customers.