Examine the problems encountered in the compilation of consumer’s price index

1. Selection of base year when prices were stable, it should be free from abnormal conditions like wars, famines, floods, political instability, etc.
2. Selection of Commodities in a basket: the items selected should be

–  representative of the tastes, habits and customs of the people.

–  be recognizable,

–  stable in quality over two different periods and places.

-The economic and social importance of various items should be considered

3. Unrepresentative results due a few places sampled which do not cover the whole country.
4. It is difficult to assign weight to different because of differences in tastes and preferences.
5. Difficult in choosing the representative families, from where necessary data has to be collected.
6. Difficult to find a base year with stable prices since prices vary with seasons
7. Choice of the prices to be collected whether wholesale prices or retail prices
8. Different methods: whether simple index number or weighted index number give different values
9. Inadequate skilled labour to collect information
10. Price changes from one region to another
11. Lack of standard units for sale of the basic needs across the country
12. Inadequate funds for the process of compilation of data for instance money for transport and stationery
13. Individual income may change consumption patterns
14. Wrong information from interviewee.
15. Data collection is a tedious exercise
16. Unstable taste and preferences of interviewees.
17. Unrepresentative basket of goods due to different income groups
18. Price discrimination may make it difficult to choose a price of a commodity.
19. Food basket may change when a new commodity enters market