What are the weaknesses and strength of the consumer price index?

Answer by  MoneyMan (7)

It is a sampling of prices paid by all consumers, but, like all samples, it doesn't necessary represent the true overall movement of prices. More importantly, it does not necessarily represent movement of prices relevant to you, your area, or your investments.

Answer by  gk215 (25)

One strenght of the Consumer Price Index (CPI) is that it offers a standardized benchmark for tracking inflation that is easy to understand. One weakness is that the CPI may not be the best indicator of inflation, as other metrics such as property values may be better indicators of rising prices.

Answer by  JFP (13)

The strength is that it allows people to see what prices are generally like and whether and to what degree inflation is occurring. One weakness is that it doesn't allow for different regions of the country having quite different prices, simply because the standard of living is different in the different regions.

Answer by  quisqualis (1756)

The Consumer Price Index (CPI)is accurate with respect to the whole population, but may not apply to individuals or certain homogeneous subgroups. This is because the whole "basket of goods" that the index is computed from is not essential to everyone equally. When CPI changes due to one component, the importance of that component determines the impact of the change.