Question

“The consumer price index (CPI) is a measure of the cost of living during a particular period. It measures the overall cost of the goods and services bought by a typical consumer.” Discuss three problems or biasness which are associated with consumer price index

Answer 1

Instead of having so much popularity in terms of price calculation, but still consumer price index has its limitations which are described below .

1.first one is that it's not considers substitutes because in reality as we all know that if some item is becoming expensive and people will shift to other items.

2.It only represents a consumer market basket and not for the whole economy.

3.Since consumer price index follow traditional and old approach so when a new innovation is discovered but that it is not suddenly added in the CPI and not give the accurate date of CPI