List five issues that are considered while measuring CPI.

CPI measures the change in prices of a selected range of consumer goods. It measures the changes in retail price levels. CPI is widely used as an economic indicator. But there are many problems in measuring inflation using CPI. Some of the basic issues are:

• It measures the average price of the basket of goods which are most commonly used by consumers. But the basket always remains incomplete as the new goods are to be included and the old commodities have to be eliminated.

• It includes the cost of only private goods and services and fails to consider the public goods and services.

• It assumes that consumers are continuing to buy the same commodities irrespective of the changes in price. It does not accept the reality that as certain goods become expensive, consumers substitute them with relatively less expensive commodities.

• It does not provide accurate measures of the prices and buying habits of the rural areas and does not provide data for different age groups.

• It does not consider substantial improvements and discoveries in the quality of goods and services.