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Consumer Price Index Video Lecture | Economics Class 11 - Commerce
FAQs on Consumer Price Index Video Lecture - Economics Class 11 - Commerce
| 1. What is the Consumer Price Index (CPI)? |  |
Ans. The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. It is used to track inflation and evaluate the purchasing power of consumers' money.
| 2. How is the Consumer Price Index calculated? | |
Ans. The Consumer Price Index is calculated by collecting data on the prices of a wide range of goods and services commonly purchased by urban consumers. These prices are then weighted to reflect the importance or share of each item in the average consumer's expenditure. The weighted prices are then compared to a base period to determine the percentage change in prices.
| 3. What is the significance of the Consumer Price Index? | |
Ans. The Consumer Price Index is significant as it provides a measure of inflation, which is crucial for economic policymaking and monetary policy decisions. It helps to assess the impact of price changes on the cost of living, wage adjustments, and the effectiveness of government policies in controlling inflation.
| 4. How is the Consumer Price Index used in wage negotiations? | |
Ans. The Consumer Price Index is often used as a benchmark in wage negotiations. Labor unions and employers may refer to the CPI to determine the appropriate level of wage increases to maintain the purchasing power of workers. If the CPI indicates high inflation, workers may demand higher wage increases to keep up with rising prices.
| 5. What are the limitations of the Consumer Price Index? | |
Ans. The Consumer Price Index has a few limitations. It may not accurately reflect the inflation experienced by specific demographic groups or regions, as it represents an average for urban consumers. Additionally, the CPI does not account for changes in quality or the introduction of new products, which can impact consumer purchasing decisions. Finally, the CPI may not fully capture changes in housing costs, leading to potential distortions in the overall inflation measurement.
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Video Description: Consumer Price Index for Commerce 2025 is part of Economics Class 11 preparation.
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