Question

• Q2 Consider the CPI basket in Covid-19 pandemic period. Approximately last three months, individuals' consumption behaviours have dramatically changed around the world. What is your opinion about the relevance of CPI for Covid-19 pandemic period? Is it still pertinent measure for cost of living? Why? What do you think about the CPI inflation rates that are announced by the countries in this period? What is your suggestion? Elaborate your answer within no more than 10-12 lines.

Answer 1

Answer:

The CPI in general implies the changes in the purchasing power of a country's currency. It consists of goods and services that are in general mostly consumed by the people of that country. But during the COVID19 pandamic the consumption pattern of people get changed. This pandamic has created such a critical and complex situation that have shifted the consumption pattern of many people. Therefore, in my opinion the CPI with the normal bundle of good and services fails to show the real senario of the contries. Apart from that, during the pandamic due to close down of markets the price data for many goods and services could not be collected by the authority officials, which in turn makes difficult for the government in planning and decision making to revive the economy.

In view of the current situation, the CPI is not a pertinent measure for cost of living. This is because the pandamic has brought changes in the living style of the people which means their demand for goods and services are diverted into a different direction than before.

The pandamic makes hurdle in collecting price data for many good and services accross the countries. Some experts of economics says the defficiencies in the data collection could affect the accuracy and reliability of the indicators.

In my opinion, CPI is a very important index for an economy so the authorites should give more concern on how to properly measure the CPI by bring some changes in the bundles of goods and services. Moreover, in order to describe the cost of living of the people in this situation the athories could consider about adding some new item into the bundles which are newly become essential to the people around the world.