Question

why do we need to calculate the cpi and what is the basket of consumers good and services?

Answer 1

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The consumer price index (CPI) calculates or measures the average variance (change) in prices period time that consumers pay for goods and services baskets, generally called Inflation. Primarily it tried to quantify the total level of price in an economy and thus calculates the purchasing power of an economy’s unit of currency. The Consumer price index represents the variance in the prices of every goods and service which is purchased for consumption purpose by urban household sectors. User fees like water fees and sewer fees services and sales and excise duty which is paid by the consumer are also added. Investment items for example stocks, bonds, and life insurance and income taxes are not included. This adaptation is to aid make sure that the basket of goods and services is as representative as feasible in terms of evaluating the impact of variances in the price on the cost of living. Basket is essential to consider constantly variances in tastes, preference,s and trends.