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) measures changes in the prices of a fixed basket of goods and services typically purchased by households (food, clothing, housing, healthcare, transport, etc.). It reflects the cost of living for a representative consumer.
Step 2: Distinguish from other indices.
- Wholesale Price Index (WPI): Measures price changes at wholesale (bulk trade) level, not directly consumer purchases.
- Capital Goods Index: Refers to industrial output index, not a price measure of consumer goods.
- Inflation: Refers to the general rise in price levels, which is measured using indices like CPI or WPI, but is not itself an index.
Step 3: Conclusion.
Since the question specifically refers to the "representative consumer", the correct answer is Consumer Price Index.
Final Answer: \[ \boxed{\text{Consumer Price Index (CPI)}} \]