Question

The index of prices of a given basket of commodities which are bought by the representative consumer is known as:

• A. Consumer Price Index
• B. Wholesale Price Index
• C. Capital Good Index
• D. Inflation

Hint:

CPI = consumer-level prices; WPI = wholesale-level prices. Inflation is measured using CPI/WPI but is not itself the index.

Answer 1

The Correct Option is A

Step 1: Define CPI.
The Consumer Price Index (CPI) tracks price fluctuations for a consistent selection of household goods and services, including food, clothing, housing, healthcare, and transportation. It represents the typical household's cost of living.
Step 2: Differentiate from related indices.
- Wholesale Price Index (WPI): Tracks price changes in bulk trade, not direct consumer purchases.
- Capital Goods Index: Measures industrial output, not consumer goods prices.
- Inflation: Refers to a broad increase in price levels, measured by indices like CPI or WPI, but is not an index itself.
Step 3: Conclude.
Given the focus on the "representative consumer," the appropriate index is the Consumer Price Index.
Final Answer: \[\boxed{\text{Consumer Price Index (CPI)}}\]