Construction of Index Number and CPI

Construction of Index Number and CPI - Construction of...

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Construction of Index Number and CPI: Earlier we have computed the deflator and used it as a tool for measurement of the inflationary rise in prices. This is one example of an index number. There are a variety of index numbers or indices constructed and used for the purpose of comparing several quantitative changes as prices, money supply, wages, national income, population etc. Some of the examples of price indices are Wholesale, Retail, Standard of living etc. There are certain standard index numbers of which three are commonly used. These are Paasche’s, Laspeyre’s and Fisher’s index numbers. Of these, Sir Irving Fisher’s index number is foolproof and is completely unbiased. Consumer Price Index (CPI) is a special type in price indices. It is considered as a standard or basic tool of comparison of the extent of and effect of changes in the price level . We will illustrate the method of construction of the CPI. In order that the value of the CPI should be representative and reliable several precautions have to be taken. The goods included in the
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This note was uploaded on 11/17/2011 for the course EC ec 201 taught by Professor - during the Fall '10 term at Montgomery.

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Construction of Index Number and CPI - Construction of...

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