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Calculation of Inflation

Samar bought ...

Question

Samar bought vegetables and ration for his house. He had made a budget for himself, but he saw that he exceeded it as he has spent more money as compared to the previous year. He wants to calculate the price rise to know how he can fix a new budget.

Which index should he use for the calculation of the same?

A

Price index

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B

Wholesale price index

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C

Consumer price index

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D

Food price index

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Solution

The correct option is C Consumer price index
Samar bought the goods for himself. Hence, he was the final consumer of these goods, and he brought the same in retail. To compare the two bills, he should use a consumer price index or CPI. It is a price index that is calculated for the goods and services bought at retail value. It varies for each individual.

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