International Islamic University, Islamabad

Assignment No. 01

Submitted By: Reg. No.

Sabih Ahmed 5245-FMS/MBA/F11

Submitted To:

Sir Ikramullah Toor

PRICE INDEX
History of early price indices:
No clear consensus has emerged on who created the first price index. The earliest reported research in this area who examined price level change in his 1675 book

Consumer price index: (CPI)

A consumer price index (CPI) is the main measure of price changes at the retail level. It measures changes in the cost of buying a representative fixed basket of goods and services and in generally accepted as measure of inflation in the country.

Background
The CPI was computed for the first time with 1948-49 as a base for industrial workers in the cities like Lahore, Karachi and Sialkot. Continuous efforts were being made to make CPI more representative by improving and expanding its scope and coverage in terms of items, category of employees, cities and markets. Accordingly, the CPI series were computed with 1959-60, 1969-1970, 1975-76, 1980-81 and 2001-01 as base years. At present, the CPI is being computed with 2007-08 as base year.

Reason of measurement
It is measured to get known the inflation rate.

No. of items. (CPI)

The CPI includes 487 items in the basket of goods and services, which represent the taste, habits and customs of the people. The groups are 12 in which these items are divided as food & non-alcoholic beverages, alcoholic beverages & tobacco, clothing & footwear, housing (utilities etc), furnishing & household equipments, health, transport, communication, recreation & culture, education, restaurants & hotels, miscellaneous goods & services.

Details of Items Included in CPI.

Sr. no. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Item House rent Fresh milk Electricity Wheat Flour Education Communication & apparatus Motor Fuel Transport Services Meat Vegetable Ghee Fresh Fruits Cooking Oil Rice Gas Footwear

Weight 21.8149 6.6800 4.3985 4.1648 3.9431 3.1536 3.0269 2.7034 2.4303 2.0714 1.8649 1.7538 1.5821 1.5756 1.5504

Suggestion: Cpi has great impact on our life. Due to the up and down of the prices, market and consumer both disturbs. The table is showing inflation which shows that economy is not growing, consistent prices shows that economy is stable.

Income Groups:
As the consumption pattern of individuals depends on their income level, the population under observation is therefore, categorized under various income quintiles. Quintile Q-1 Q-2 Q-3 Q-4 Q-5 Income Up to Rs.8000/Rs.8001-to-Rs.12000/Rs.12001-to-Rs.18000/Rs.18001-to-Rs.35000/Above Rs.35000/-

Surveys Conducted:
Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Name Of city Rawalpindi Islamabad Attock Jhelum Lahore Sahiwal Gujrawala Wazirabad Sialkot Faislabad Jhang Multan Muzafarghar D.G Khan Vehari No. Of market 6 4 1 1 7 1 1 1 1 2 1 3 1 1 1

16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

Sargodha Mianwali Bahawalpur Bhawalnagar R.Y Khan Karachi Hyderabad Nawab Shah Mirpur Khas Mithi Sukkur Larkana Dadu Peshawar Mardan Abbottabad Bannu D.I. Khan Mingora Quetta Turbat Gawadar Loralai Khuzdar Dera Murad Total number of markets

1 1 1 1 1 13 04 01 01 01 02 01 01 03 01 01 01 01 01 02 01 01 01 01 01 76

Frequency:
PBS staff located in 34 Regional/Field offices collects CPI data regularly on monthly basis. They personally visits shops, stores and establishments according to a predetermined time schedule and collect prices of the selected items. Prices are reported schedules specifically developed for the purpose. The contents of the schedule include name of city, item, it specification and unit price quoted by four different shopkeepers in market. The time schedule for collection of CPI prices is as under:-

Name of Schedule Part-I: Food, Beverages & Tobacco Part-II: Wearing, Housing(Utilities) Part-III: Furnishing, Households & health. Part-IV: Transport, communication, recreation & culture, education and miscellaneous goods & services

Frequency of data Date of collection Monthly 11-14 of each month Monthly Monthly Monthly 1-3 of each month 4-6 of each month 7-10 of each month

Formula:
In = (Pn/Po) x wi x 100 / wi Where In= CPI for the nth period Pn= price of an item in the nth period Po= price of an item in the base period Wi= weight of the item in the base period= Po x qo PoxQo wi= Total weight of all items

Use:
Consumer Price Index (CPI) is considered the most common measure of general Inflation.