Measurement of inflation, Managerial Economics

Measurement of Inflation

The rate of inflation is measured using the Retail Price Index.  A retail Price Index aims to measure the change in the average price of a basket of goods and services that represents the consumption pattern of a typical household.  It estimates the change in the cost to consumers of a range of commodities that they typically buy.  It is usually prepared for different classes of consumers and for different areas. 

The calculation of the index requires:

  • Selection of commodities to be included in the consumers basket
  • Selection of the base period weights for each commodity
  • Date on prices of the commodities in the current period and in the base period

Such an index then estimates the cost of living or the purchasing power of incomes. If the index increases by 10% in a given period, wages would need to rise by 10% for purchasing power to remain constant.  It is in this regard that trade unions and workers demand that wages should increase pari-passu with the cost of living index.

Posted Date: 11/30/2012 4:43:14 AM | Location : United States







Related Discussions:- Measurement of inflation, Assignment Help, Ask Question on Measurement of inflation, Get Answer, Expert's Help, Measurement of inflation Discussions

Write discussion on Measurement of inflation
Your posts are moderated
Related Questions
The Determination of the Value Money   Since money is primarily a medium of exchange, the value of money means what money will buy.  If at one time a certain amount of money


Q. What is Data mining? Data mining: Data mining is the process of extracting patterns from data. Data mining is seen as an increasingly important tool by modern business to

Suppose you are an efficient expert hired by a manufacturing firm that uses two inputs, labor (L) and capital (K). The firm produces and sells a given output. You have the followin

Equilibrium National Income in a Frugal Economy Saving and investment are examples of two categories of expenditure called withdrawals and injections.  A WITHDRAWAL is any inc

A firm in a perfectly competitive market invents a new situation of production that lowers its marginal costs.  What happens to its output? What happens to the price it charges?

The supply of money Refers to the total amount of money in the economy. Most countries of the world have two measures of the money stock - broad money supply and narro

Determine the uses of Managerial economics Managerial economics studies the application of the principles, methods and techniques of economics to managerial problems of busine

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Causes There are a number of explanations of the business cycle but changes in the level of investment seem to be the most likely.  In the simplest Keynesian model an increase