Explain steps involved in construction of cost of living index numbers
Answers
Answer:
Step-by-step explanation:
he following are main steps in the construction of consumer price index number. 1. Object and scope. 2. Conducting family budget survey. 3. Obtaining price quotations. 4. Method of construction. (a) Object and Scope: Decide the class of consumers for Which Index number is required to construct. As whether Index number is meant for government employees, merchants, farmers, etc., Also, the geographical location, as that of locality, city or town, or a community of people who are having the similar consumption pattern. (b) Conducting family budget survey: A sample survey regarding the. average expenses of families on various items of consumption is conducted. In the survey, the information regarding commodities consumed by the families, the quality and the respective budget is collected. The items included are under the heads of (i) Food, (ii) Clothing (iii) Fuel and Lighting and (iv) Miscellaneous. Each of these can be divided into smaller groups as food may be included wheat, rice, dhal, etc., (c) Obtaining price quotations: While constructing the cost of living Index number, retail prices of commodities are to be collected. The price lists are obtained from different agencies from different places, then they are averaged and these average prices are used in the construction of Index Number. Here price list of current period and base period should be collected. (d) Methods of construction: There are two methods of construciton of consumer price Index Number