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Consider the following statements regarding Producer Price Index (PPI).
1. PPI gives an idea of consumer prices in the future.
2. In PPI only basic prices and taxes are used while trade margins and transport cost are
excluded.
1. PPI gives an idea of consumer prices in the future.
2. In PPI only basic prices and taxes are used while trade margins and transport cost are
excluded.
Which of the above statement/s is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'A'. Can you explain this answer?
Verified Answer
Consider the following statements regarding Producer Price Index (PPI)...
The PPI measures price changes from the perspective of the producer while the cosumer priceindex (CPI) measures it from the consumers’ perspective. As the producers sell at higher pricesto their wholesellers, so retailers and the price increase is translated into the higher consumerprices—thus the PPI is useful in having an idea of the consumer prices in the future.In PPI, only basic prices are used while taxes, trade margins and transport costs are excluded.This index is considered a better measure of inflation as price changes at primary andintermediate stages can be tracked before it gets built into the finished goods stage.The proposal of switching over to the PPI (from the WPI) came up from the Government bymid-2003. A working Group was set up in mid-2003–04 under the chairmanship of Prof. AbhijitSen, Member, Planning Commission to fulfill the twin tasks of:I. Revising the current series of the WPI (i.e. base 1993–94) andII. Recommending a producer price index (PPI) for India which could replace the WPI.
Most Upvoted Answer
Consider the following statements regarding Producer Price Index (PPI)...
Explanation:
The Producer Price Index (PPI) is a measure of the average change over time in the selling prices received by domestic producers for their output. It is often used as an indicator of inflationary pressures in the economy. Let's analyze the given statements regarding the PPI:
Statement 1: PPI gives an idea of consumer prices in the future.
This statement is incorrect. The PPI measures the prices received by producers, not consumers. It provides information about the cost of inputs for producers, which can then be passed on to consumers in the form of higher prices. However, it does not directly measure consumer prices in the future.
Statement 2: In PPI only basic prices and taxes are used while trade margins and transport cost are excluded.
This statement is correct. The PPI measures the prices received by producers at the final stage of production, which includes basic prices and taxes. It excludes trade margins and transport costs, which are considered secondary costs and can vary depending on factors such as distribution and marketing strategies. By excluding these costs, the PPI focuses on the underlying price changes in the production process.
Conclusion:
Based on the above analysis, we can conclude that only statement 2 is correct. The PPI does not give an idea of consumer prices in the future (statement 1 is incorrect). It only includes basic prices and taxes while excluding trade margins and transport costs (statement 2 is correct). Therefore, the correct answer is option 'A' - 1 only.
The Producer Price Index (PPI) is a measure of the average change over time in the selling prices received by domestic producers for their output. It is often used as an indicator of inflationary pressures in the economy. Let's analyze the given statements regarding the PPI:
Statement 1: PPI gives an idea of consumer prices in the future.
This statement is incorrect. The PPI measures the prices received by producers, not consumers. It provides information about the cost of inputs for producers, which can then be passed on to consumers in the form of higher prices. However, it does not directly measure consumer prices in the future.
Statement 2: In PPI only basic prices and taxes are used while trade margins and transport cost are excluded.
This statement is correct. The PPI measures the prices received by producers at the final stage of production, which includes basic prices and taxes. It excludes trade margins and transport costs, which are considered secondary costs and can vary depending on factors such as distribution and marketing strategies. By excluding these costs, the PPI focuses on the underlying price changes in the production process.
Conclusion:
Based on the above analysis, we can conclude that only statement 2 is correct. The PPI does not give an idea of consumer prices in the future (statement 1 is incorrect). It only includes basic prices and taxes while excluding trade margins and transport costs (statement 2 is correct). Therefore, the correct answer is option 'A' - 1 only.
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Consider the following statements regarding Producer Price Index (PPI).1. PPI gives an idea of consumer prices in the future.2. In PPI only basic prices and taxes are used while trade margins and transport cost areexcluded.Which of the above statement/s is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?
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Consider the following statements regarding Producer Price Index (PPI).1. PPI gives an idea of consumer prices in the future.2. In PPI only basic prices and taxes are used while trade margins and transport cost areexcluded.Which of the above statement/s is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements regarding Producer Price Index (PPI).1. PPI gives an idea of consumer prices in the future.2. In PPI only basic prices and taxes are used while trade margins and transport cost areexcluded.Which of the above statement/s is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements regarding Producer Price Index (PPI).1. PPI gives an idea of consumer prices in the future.2. In PPI only basic prices and taxes are used while trade margins and transport cost areexcluded.Which of the above statement/s is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?.
Consider the following statements regarding Producer Price Index (PPI).1. PPI gives an idea of consumer prices in the future.2. In PPI only basic prices and taxes are used while trade margins and transport cost areexcluded.Which of the above statement/s is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements regarding Producer Price Index (PPI).1. PPI gives an idea of consumer prices in the future.2. In PPI only basic prices and taxes are used while trade margins and transport cost areexcluded.Which of the above statement/s is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements regarding Producer Price Index (PPI).1. PPI gives an idea of consumer prices in the future.2. In PPI only basic prices and taxes are used while trade margins and transport cost areexcluded.Which of the above statement/s is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?.
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