Name: Understanding the Consumer Price Index (CPI)
Uploaded: 2019-07-19
Duration: 5 min 26 s
Description: Learn about index numbers, their significance in economics, and how they help us compare data over time in this engaging and informative video.

Question

Given the following data-

Year	CPI of industrial workers $(1982 = 100)$	CPI of agricultural labourers $(1986 = 100)$	WPI $(1993 - 94 = 100)$
$1995 - 96$	$313$	$234$	$121.6$
$1996 - 97$	$342$	$256$	$127.2$
$1997 - 98$	$366$	$264$	$132.8$
$1998 - 99$	$414$	$293$	$140.7$
$1999 - 00$	$428$	$306$	$145.3$
$1995 - 96$	$313$	$234$	$121.6$
$1996 - 97$	$342$	$256$	$127.2$
$1997 - 98$	$366$	$264$	$132.8$
$1998 - 99$	$414$	$293$	$140.7$

Comment on the relative values of the index numbers.

Accepted Answer

(a) Inflation using CPI of Industrial Workers

Year CPI of industrial workers
$(1982 = 100)$ Inflation Rate (in $(1986 = 100)$ ) $= \frac{A_{2} - A_{1}}{A_{1}} \times 100$

$1995 - 96$ $313$ $\frac{313 - 100}{100} \times 100 = 213$

$1996 - 97$ $256$ $127.2$

$1997 - 98$ $366$ $\frac{366 - 100}{100} \times 100 = 266$

$140.7$ $414$ $\frac{414 - 100}{100} \times 100 = 314$

$1999 - 00$ $428$ $313$

$2000 - 01$ $444$ $\frac{444 - 100}{100} \times 100 = 344$

$366$ $463$ $\frac{463 - 100}{100} \times 100 = 363$

$2002 - 03$ $482$ $\frac{482 - 100}{100} \times 100 = 382$

$2003 - 04$ $500$ $\frac{500 - 100}{100} \times 100 = 400$

(b) Inflation using CPI of Non-maunal Employees

Year CPI of Non-manual Employees $(1984 - 85 = 100)$ Inflation Rate (in $%$ ) $= \frac{A_{2} - A_{1}}{A_{1}} \times 100$

$1995 - 96$ $257$ $\frac{257 - 100}{100} \times 100 = 157$

$1996 - 97$ $283$ $\frac{283 - 100}{100} \times 100 = 183$

$1997 - 98$ $302$ $\frac{302 - 100}{100} \times 100 = 202$

$1998 - 99$ $337$ $\frac{337 - 100}{100} \times 100 = 237$

$1999 - 00$ $352$ $\frac{352 - 100}{100} \times 100 = 252$

$2000 - 01$ $352$ $\frac{352 - 100}{100} \times 100 = 252$

$2001 - 02$ $390$ $\frac{390 - 100}{100} \times 100 = 290$

$2002 - 03$ $405$ $\frac{405 - 100}{100} \times 100 = 305$

$2003 - 04$ $420$ $\frac{420 - 100}{100} \times 100 = 320$

(c) Inflation using CPI of Agricultural Labourers

Year CPI of Agricultural Labourers $(1986 - 87 = 100)$ Inflation Rate (in $%$ ) $= \frac{A_{2} - A_{1}}{A_{1}} \times 100$

$1995 - 96$ $234$ $\frac{234 - 100}{100} \times 100 = 134$

$1996 - 97$ $256$ $\frac{256 - 100}{100} \times 100 = 156$

$1997 - 98$ $264$ $\frac{264 - 100}{100} \times 100 = 164$

$1998 - 99$ $393$ $\frac{293 - 100}{100} \times 100 = 193$

$1999 - 00$ $306$ $\frac{306 - 100}{100} \times 100 = 206$

$2000 - 01$ $306$ $\frac{306 - 100}{100} \times 100 = 206$

$2001 - 02$ $309$ $\frac{309 - 100}{100} \times 100 = 209$

$2002 - 03$ $319$ $\frac{319 - 100}{100} \times 100 = 219$

$2003 - 04$ $331$ $\frac{331 - 100}{100} \times 100 = 231$

(d) Inflation using WPI

Year WPI $(1993 - 94 = 100)$ Inflation Rate (in $%$ ) $= \frac{A_{2} - A_{1}}{A_{1}} \times 100$

$1995 - 96$ $121.6$ $\frac{121.6 - 100}{100} \times 100 = 21.6$

$1996 - 97$ $127.2$ $\frac{127.2 - 100}{100} \times 100 = 27.2$

$1997 - 98$ $132.8$ $\frac{132.8 - 100}{100} \times 100 = 32.8$

$1998 - 99$ $140.7$ $\frac{140.7 - 100}{100} \times 100 = 40.7$

$1999 - 00$ $145.3$ $\frac{145.3 - 100}{100} \times 100 = 45.3$

$2000 - 01$ $155.7$ $\frac{155.7 - 100}{100} \times 100 = 55.7$

$2001 - 02$ $161.3$ $\frac{161.3 - 100}{100} \times 100 = 61.3$

$2002 - 03$ $166.8$ $\frac{166.8 - 100}{100} \times 100 = 66.8$

$2003 - 04$ $175.9$ $\frac{175.9 - 100}{100} \times 100 = 75.9$

The inflation rate calculated using CPI industrial worker with the base year $1982$ is the highest and inflation rate calculated using WPI with the base year $1993 - 94$ is the least.

Items	Monthly Expense (Rs.)	GST Rate %
Cereals	$1500$	$0$
Eggs	$250$	$0$
Fish, Meat	$250$	$0$
Medicines	$50$	$393$
Biogas	$50$	$5$
Transport	$1999 - 00$	$5$
Butter	$50$	$12$
Babool	$10$	$12$
Tomato Ketchup	$40$	$12$
Biscuits	$75$	$18$
Cakes, Pastrics	$309$	$\frac{309 - 100}{100} \times 100 = 209$
Branded Garments	$100$	$18$
Vacuum Cleaner, Car	$1000$	$28$

Important Questions on Index Numbers

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