Question
Explain four limitations of consumer price index numbers.
✓
Answer
- Errors may occur in the construction because of inaccurate specification of groups for whom the index is meant.
- Faulty selection of representative commodities resulting out of unscientific family budget enquiries.
- Inadequate and unrepresentative nature of price quotations and use of inaccurate weights.
- Frequent changes in demand and prices of the commodity. The average family might not be always a representative one.
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