Ppt on wpi cpi

Ppt on wpi cpi

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  Whole sale priceindex & consumer price index
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  WHOLE SALE PRICEINDEX (WPI) Wholesale price index ( WPI) is designed to measure the change of price in the primary and wholesale markets.  
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  THE CONSUMER PRICEINDEX • 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 Labor Statistics reports the CPI each month. • It is used to monitor changes in the cost of living over time.
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  Consumer Price Index •“ Consumer Price Index is the main measure of price changes at the retail level. It measures changes in the cost of buying a representative fixed basket of goods and services and is generally accepted as a measure of inflation in the country”. • When the CPI rises, the typical family has to spend more dollars to maintain the same standard of living.
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  Limitation of CPI 1)Coverage is limited 2) Only covers Urban Centres 3) Prices may have different trend in rural & urban centres. 4) Rent is computed through construction input items index instead of rent survey. 5) It measures partially inflation not total consumer’s expenditure.
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  Why Two Typesof Indices? • CPI measures Inflation rate in the country • WPI measures the General Price level in the whole sale market.
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  WHAT CPI MEASURES? •It measures Price changes of fixed market basket of goods and services of constant quality and quantity. • It tells how much cost of living has risen or fallen due to price changes irrespective of changes in consumer behaviour or quality of goods. • It does not reflect the cost of living or in house hold consumption expenditure as such but only the influence of price fluctuation on the trend.
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  Selection of Markets/Outlets andCities • Items are selected on the basis of Family Budget Survey • Markets are selected through retail and wholesale trade survey. • Outlets are selected on transaction value basis. • Cities are selected on population basis • Stratified sampling are used for selection of cities.
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  How the ConsumerPrice Index Is Calculated • Fix the Basket: Determine what prices are most important to the typical consumer. ▫ The Bureau of Labor Statistics (BLS) identifies a market basket of goods and services the typical consumer buys. ▫ The BLS conducts monthly consumer surveys to set the weights for the prices of those goods and services.
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  How the ConsumerPrice Index Is Calculated • Find the Prices: Find the prices of each of the goods and services in the basket for each point in time. • Compute the Basket’s Cost: Use the data on prices to calculate the cost of the basket of goods and services at different times. • Compute the inflation rate: The inflation rate is the percentage change in the price index from the preceding period
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  How the ConsumerPrice Index Is Calculated • 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.
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  How the ConsumerPrice Index Is Calculated • The Inflation Rate ▫ The inflation rate is calculated as follows: C P I in Y e a r 2 - C P I in Y e a r 1 In fla tio n R a te in Y e a r 2 = ×100 C P I in Y e a r 1
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  Table 1 Calculatingthe Consumer Price Index and the Inflation Rate: An Example Copyright©2004 South-Western
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  Table 1 Calculatingthe Consumer Price Index and the Inflation Rate: An Example Copyright©2004 South-Western
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  Table 1 Calculatingthe Consumer Price Index and the Inflation Rate: An Example Copyright©2004 South-Western
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  Table 1 Calculatingthe Consumer Price Index and the Inflation Rate: An Example Copyright©2004 South-Western
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  Table 1 Calculatingthe Consumer Price Index and the Inflation Rate: An Example Copyright©2004 South-Western
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  How the ConsumerPrice Index Is Calculated • Calculating the Consumer Price Index and the Inflation Rate: Another Example ▫ ▫ ▫ ▫ ▫ Base Year is 2002. Basket of goods in 2002 costs $1,200. The same basket in 2004 costs $1,236. CPI = ($1,236/$1,200) × 100 = 103. Prices increased 3 percent between 2002 and 2004.
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  FYI: What’s inthe CPI’s Basket? 16% Food and beverages 17% Transportation Education and communication 6% 41% Housing 6% 6% 4% 4% Medical care Recreation Apparel Other goods and services Copyright©2004 South-Western