Why may price indices be unreliable indicators of cost of living?
- Unrepresentative results due a few places sampled which do not cover the whole country.
- It is difficult to assign weight to different because of differences in tastes and preferences.
- Difficult in choosing the representative families, from where necessary data has to be collected.
- Difficult to find a base year with stable prices
- Variations of prices with seasons.
- Choice of the prices to be collected whether wholesale prices or retail prices
- Different methods: whether simple index number or weighted index number give different values
- Inadequate skilled labour to collect information
- Regional differences in prices of basic needs
- Lack of standard units for sale of the basic needs across the country
- Inadequate funds for the process of compilation of data for instance money for transport and stationery
- Individual income may change consumption patterns
- Wrong information from interviewee.
- Unstable taste and preferences of interviewees.
- Unrepresentative basket of goods due to different income groups.
- Price discrimination may make it difficult to choose a price of a commodity.
- Food basket may change when a new commodity enters market.
CATEGORIES Economics
TAGS Dr. Bbosa Science
