Focus: GS-III Indian Economy
Why in news?
The All-India Consumer Price Index Numbers for Agricultural Labourers and Rural Labourers for the month of June, 2020 decreased by 1 points each.
The major contribution towards the fall in general index of Agricultural Labourers and Rural Labourers came from food.
Consumer Price Index (CPI)
- Consumer Price Index (CPI) is the measure of changes in the price level of a basket of consumer goods and services bought by households.
- CPI is an economic indicator, most widely used measure of inflation.
- It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them.
- The CPI measures the average change in prices over time that consumers pay for a basket of goods and services, commonly known as inflation.
- Changes in the CPI are used to assess price changes associated with the cost of living; the CPI is one of the most frequently used statistics for identifying periods of inflation or deflation.
- The weighted average of the prices of goods and services that approximates an individual’s consumption patterns is used to calculate CPI.
- The Consumer Price Index or CPI is calculated by multiplying 100 to the fraction of the cost price of the current period and the base period. CPI = (Cost of basket in current period/ Cost of basket in base period) x 100