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BEC - Business Environment & Concepts (Forum Locked Forum Locked)
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Subject Topic: BEC-Consumer price index Post ReplyPost New Topic
  
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Usagi
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Posted: 21 Nov 2011 at 09:45 | IP Logged Quote Usagi

Anyone please help me to understand this question and answer?
This is regarding to CPI (Consumer price index)

Is there two concept in CPI? Goods that consumer want to buy and goods that the company want to buy? I can't get it. Please help me to  explain???

Bisk 50-49
Which of the following is correct regarding the consumer price index for measuring the estimated decrease in a company's buying power?

a. The CPI is measured only every 10 years
b. The product a company buys should differ from what a consumer buys.
c. The CPI measures what consumers will pay for items.
d. The CPI si skewed by foreign currency transactions.

The answer is b.

The CPI is a comparison of the price of items in a typical consumer's shopping cart to a base value.
To the extent that company's purchases would be different from a consumer's purchase, the CPI may be misleading when used for a analysis of a company's buying power.

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helencpa
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Posted: 21 Nov 2011 at 17:42 | IP Logged Quote helencpa

yes Usagi,
there are two methods. One is the normal CPI which is the consumer price index and there is PPI which is producer price index which measures the price of finished goods and materials at the wholesale level and it is mentioned in Wiley book page 128.
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Usagi
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Posted: 21 Nov 2011 at 20:33 | IP Logged Quote Usagi

Dear HelenCPA

Thank you so much for your answer.I'm so glad.I'm gonna check out wiley page 128.(I couldn't find any article regarding this in Bisk) Again Thank you so much!
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ktcpanet
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Posted: 21 Nov 2011 at 22:02 | IP Logged Quote ktcpanet

Hmm, this question is quite confusing to me. 

The whole " regarding the consumer price index for measuring the estimated decrease in a company's buying power"

Why would they use the consumer price index for measuring the estimated decrease in a company's buying power in the first place?  The consumer price index is the price that urban consumers paid for goods in relation to the price of the same goods in a base period.  This, to my knowledge, has nothing to do with a COMPANY's buying power...  Because it's about consumers, not companies...

So maybe the answer is trying to say -  you can't use CPI to measure the change in buying power for a company, because the CPI has to do with consumers, not companies.  But why would a certain PRODUCT the company buys being different than the PRODUCT a consumer buys come into play?  As the selected "correct" answer says.  It doesn't matter WHAT they buy, only the overall aggregate prices matter, right?

I don't know- I really don't like that question- Maybe I'm not getting it or something, but that question seems very vague in what it's asking, and even the answer seems a little off-target. 




__________________
Bec - 7/14/09 78 (lost credit)
Aud - 2011 91 (Wiley)
Reg - 7/3/10 2011 92 (yaeger)
Far - 5/13/09 - 85 (lost credit)
Yaeger Video/Book (FAR, REG)
Wiley Book (AUD, FAR)
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Usagi
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Posted: 21 Nov 2011 at 22:32 | IP Logged Quote Usagi

I think this question is very confusing and difficult.

'you can't use CPI to measure the change in buying power for a company, because the CPI has to do with consumers, not companies. '

This is correct ...

That's why the answer recommand to use PPI for measuring company's buying power because the preference bet. consumer and company is different...
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