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What is Wholesale Price Index? Video Lecture | Business Economics for CA Foundation

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1. What is Wholesale Price Index (WPI)?
Ans. The Wholesale Price Index (WPI) is an economic indicator that measures the average change in the prices of goods sold in bulk by wholesale businesses. It is used to track inflation and price movements in the wholesale market.
2. How is the Wholesale Price Index calculated?
Ans. The Wholesale Price Index is calculated by taking into account the price changes of a selected basket of goods over a specific period of time. The prices of these goods are collected from wholesale businesses and are given weightage based on their importance in the wholesale market. The WPI is then calculated by dividing the total value of the basket of goods in the current period by the total value in the base period and multiplying it by 100.
3. What is the difference between Wholesale Price Index and Consumer Price Index?
Ans. The Wholesale Price Index (WPI) measures the average change in the prices of goods sold in bulk by wholesale businesses, while the Consumer Price Index (CPI) measures the average change in the prices of goods and services purchased by consumers. The WPI focuses on the wholesale market, while the CPI reflects the prices paid by consumers. Additionally, the WPI includes goods and services sold to businesses, while the CPI only includes goods and services purchased by households.
4. How is the Wholesale Price Index used in economic analysis?
Ans. The Wholesale Price Index is widely used in economic analysis for various purposes. It helps in tracking inflation and understanding price movements in the wholesale market. It provides insights into the cost of production for businesses and helps in analyzing the impact of price changes on profitability. Economists and policymakers also use the WPI to monitor the performance of various sectors of the economy and to make informed decisions regarding monetary and fiscal policies.
5. What are the limitations of the Wholesale Price Index?
Ans. The Wholesale Price Index, like any other economic indicator, has certain limitations. One limitation is that it does not capture the price changes of all goods and services in the economy, as it focuses on wholesale goods only. Additionally, it does not take into account changes in quality and quantity of goods over time. Moreover, the weightage assigned to different goods may not accurately reflect their importance in the economy, leading to potential biases in the index. It is important to consider these limitations when interpreting and using the Wholesale Price Index in economic analysis.
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