Question

What is important of price index​

Answer 1

Answer:

Price index is important for measuring changes in the price level.

Explanation:

=> Changes in the levels of prices are mea­sured using a scale called a price index. This is the most useful device for measuring change in the price level.

=> In most countries price indexes are used to measure inflation, each focusing on the prices of a collection of goods and services important to a particular seg­ment of the economy.

=> A price index is a measure of price changes using a percentage scale.

=> A price index can be based on the prices of a single item or a selected group of items, called a market basket.

=> For example, several hundred goods and services—such as rent, electricity, and automobiles—are used in calculating the con­sumer price index.

=> Because a market basket includes a range of goods and services, it pro­vides a more comprehensive measure of inflationary pressure than a single item would.