Question

calculate consumer price index number using family budget method for the following data​

Answer 1

Answer:

Step-by-step explanation:Methods of constructing consumer price Index  

There are two methods of constructing consumer price index. They are:

1. Aggregate Expenditure method (or) Aggregate method

2. Family Budget method or method of weighted relative method.

1. Aggregate Expenditure method

This method is based upon the Laspeyre’s method. It is widely used. The quantities of commodities consumed by a particular group in the base year are the weight.

Thus, consumer price index number =  

2. Family budget method (or) Method of weight relatives method

This method estimates an aggregate expenditure of an average family on various items and it is weighted. It is given by

consumer price index =  

where

p = p1/ p0 × 100 for each item and w = p0q0

The family budget method is the same as “weighted average price relative method” which we have studied earlier.

Answer 2

Under this method, we take the quantities of consumption of various commodities by a particular section of the people in the base year as weights. We then calculate the total expenditure of each commodity for each year.

For this, we need to multiply the price of the current year with the quantity or weight of the base year and add these products. Similarly, we have to calculate the total expenditure for the base year of each commodity.

Thus, in order to calculate the index numbers, we have to divide the total expenditure of the current year by the total expenditure of the base year and multiply the resulting figure by 100.

This method is somewhat like the Laspeyres’ Method.

Consumer Price Index = \(\frac{∑p1q0}{∑p0q0}\) x 100

Here,

p1 = prices of the current year

p0 = prices of the base year

q0 = quantity consumed in base year.

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