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Consider the following statements:
Wholesale Price Index (WPI) basket does not cover services whereas Consumer Price Index (CPI) basket consists of services like housing, education and recreation.
Weightage of the food group is more in the CPI basket than in WPI basket.
Which of the statements given above is/are Correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
Consider the following statements: Wholesale Price Index (WPI) ba...
Explanation:
The correct answer is option C, i.e., both statements 1 and 2 are correct. Let's understand each statement in detail:
Statement 1: Wholesale Price Index (WPI) basket does not cover services whereas Consumer Price Index (CPI) basket consists of services like housing, education, and recreation.
Explanation: The Wholesale Price Index (WPI) is an index that measures the average change in the prices received by producers for their goods at the wholesale level. It measures the price changes of goods at the primary level of trade, i.e., goods sold in bulk by wholesalers to retailers.
On the other hand, the Consumer Price Index (CPI) is an index that measures the average change in the prices paid by urban consumers for a basket of goods and services. Unlike WPI, CPI includes both goods and services, as it is designed to measure the changes in prices that directly affect consumers.
The CPI basket consists of a wide range of goods and services that are commonly purchased by urban consumers. It includes services like housing, education, recreation, healthcare, transportation, etc. These services are not covered in the WPI basket, which mainly focuses on goods sold at the wholesale level.
Statement 2: Weightage of the food group is more in the CPI basket than in the WPI basket.
Explanation: The weightage of different items in the CPI basket is determined based on the expenditure patterns of urban consumers. The food group is one of the essential components of the CPI basket as it represents a significant portion of the expenditure of urban consumers.
Food items such as cereals, pulses, fruits, vegetables, dairy products, meat, etc., are given considerable weightage in the CPI basket. This is because food expenses constitute a significant part of the monthly budget of urban consumers.
On the other hand, the WPI basket focuses on goods sold at the wholesale level, including industrial commodities, manufactured goods, and primary articles. The weightage assigned to the food group in the WPI basket is relatively lower compared to the CPI basket.
This is because the WPI is primarily used to measure inflation at the wholesale level and is more influenced by factors like input costs, production costs, and trade margins. The weightage of food items in the WPI basket is determined based on their contribution to wholesale price inflation.
In conclusion, both statements 1 and 2 are correct. The WPI basket does not cover services, while the CPI basket includes services like housing, education, and recreation. Additionally, the weightage of the food group is indeed higher in the CPI basket compared to the WPI basket.
The correct answer is option C, i.e., both statements 1 and 2 are correct. Let's understand each statement in detail:
Statement 1: Wholesale Price Index (WPI) basket does not cover services whereas Consumer Price Index (CPI) basket consists of services like housing, education, and recreation.
Explanation: The Wholesale Price Index (WPI) is an index that measures the average change in the prices received by producers for their goods at the wholesale level. It measures the price changes of goods at the primary level of trade, i.e., goods sold in bulk by wholesalers to retailers.
On the other hand, the Consumer Price Index (CPI) is an index that measures the average change in the prices paid by urban consumers for a basket of goods and services. Unlike WPI, CPI includes both goods and services, as it is designed to measure the changes in prices that directly affect consumers.
The CPI basket consists of a wide range of goods and services that are commonly purchased by urban consumers. It includes services like housing, education, recreation, healthcare, transportation, etc. These services are not covered in the WPI basket, which mainly focuses on goods sold at the wholesale level.
Statement 2: Weightage of the food group is more in the CPI basket than in the WPI basket.
Explanation: The weightage of different items in the CPI basket is determined based on the expenditure patterns of urban consumers. The food group is one of the essential components of the CPI basket as it represents a significant portion of the expenditure of urban consumers.
Food items such as cereals, pulses, fruits, vegetables, dairy products, meat, etc., are given considerable weightage in the CPI basket. This is because food expenses constitute a significant part of the monthly budget of urban consumers.
On the other hand, the WPI basket focuses on goods sold at the wholesale level, including industrial commodities, manufactured goods, and primary articles. The weightage assigned to the food group in the WPI basket is relatively lower compared to the CPI basket.
This is because the WPI is primarily used to measure inflation at the wholesale level and is more influenced by factors like input costs, production costs, and trade margins. The weightage of food items in the WPI basket is determined based on their contribution to wholesale price inflation.
In conclusion, both statements 1 and 2 are correct. The WPI basket does not cover services, while the CPI basket includes services like housing, education, and recreation. Additionally, the weightage of the food group is indeed higher in the CPI basket compared to the WPI basket.
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Community Answer
Consider the following statements: Wholesale Price Index (WPI) ba...
Option (c) is the correct answer.
- Wholesale Price Index (WPI) measures the average change in the prices of commodities for bulk sale at the level of the early stage of transactions. Consumer Price Index is a measure of change in retail prices of goods and services consumed by a defined population group in a given area with reference to a base year.
- Statement 2 is correct. Wholesale Price Index (WPI) Vs Consumer Price Index (CPI): The reasons for the divergence between the two indices can also be partly attributed to the difference in the weight of the food group in the two baskets. CPI Food group has a weight of 39.1 per cent as compared to the combined weight of 24.4 per cent (Food articles and Manufactured Food products) in WPI basket.
- Statement 1 is correct. The CPI basket consists of services like housing, education, medical care, recreation etc. which are not part of WPI basket.
- A significant proportion of WPI item basket represents manufacturing inputs and intermediate goods like minerals, basic metals, machinery etc. whose prices are influenced by global factors but these are not directly consumed by the households and are not part of the CPI item basket.
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Consider the following statements: Wholesale Price Index (WPI) basket does not cover services whereas Consumer Price Index (CPI) basket consists of services like housing, education and recreation. Weightage of the food group is more in the CPI basket than in WPI basket. Which of the statements given above is/are Correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?
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Consider the following statements: Wholesale Price Index (WPI) basket does not cover services whereas Consumer Price Index (CPI) basket consists of services like housing, education and recreation. Weightage of the food group is more in the CPI basket than in WPI basket. Which of the statements given above is/are Correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements: Wholesale Price Index (WPI) basket does not cover services whereas Consumer Price Index (CPI) basket consists of services like housing, education and recreation. Weightage of the food group is more in the CPI basket than in WPI basket. Which of the statements given above is/are Correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements: Wholesale Price Index (WPI) basket does not cover services whereas Consumer Price Index (CPI) basket consists of services like housing, education and recreation. Weightage of the food group is more in the CPI basket than in WPI basket. Which of the statements given above is/are Correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?.
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