One of the questions I've received in economics has really stumped me: "Nominate the types of items included in the CPI (consumer price index) and explain why the ABS uses weightings in its...

One of the questions I've received in economics has really stumped me:

"Nominate the types of items included in the CPI (consumer price index) and explain why the ABS uses weightings in its calculation of the CPI." I'm not entirely sure what the ABS is either, any help would be greatly appreciated! 

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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If you are studying in Australia, the answer to this is relatively easy.  If you are not, then I do not know the answer.  In Australia, the consumer price index (CPI) is compiled by the Australian Bureau of Statistics.  The acronym for this bureau is ABS.  This is the ABS that is most likely to be connected to measurement of a country’s CPI.

The ABS uses weighting when it computes the CPI.  It does this because it feels that weighting is necessary in order to reach an accurate picture of what Australian households spend their money on.  The ABS feels that there are, for example, some items for which households tend to underreport their spending.  The ABS tries to determine household spending through the use of surveys.  It has found that households underreport spending on some items such as alcohol and tobacco.  In order to have the CPI truly represent real spending by households, therefore, an added weight must be given to alcohol and tobacco to make up for this underreporting. 

Assuming you are in Australia, then, the ABS that uses weighting in computing the CPI is the Australian Bureau of Statistics.

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