While calculating the consumer price index, 'housing' as an item is classified as :

The correct answer is Core service.

Key Points

• 'Housing' is considered a core service in the Consumer Price Index (CPI) calculation due to its importance as a basic necessity.
• The Consumer Price Index is used to measure inflation by tracking the price changes of a basket of goods and services, including housing.
• Housing contributes significantly to the services category of the CPI, which covers expenses like rent, utilities, and maintenance.
• The weight assigned to housing in CPI varies by country, depending on its role in the economy and household budgets.
• In India, the housing component of CPI is calculated using data such as house rents, construction costs, and maintenance expenses.

Additional Information

• Consumer Price Index (CPI):
  • CPI measures the average change in prices paid by consumers for a basket of goods and services over time.
  • It is a critical economic indicator used to assess inflation and cost of living.
  • CPI categories include goods (like food and clothing) and services (like housing, education, and healthcare).
• Core Inflation:
  • Core inflation excludes volatile items like food and fuel to provide a clearer picture of long-term inflation trends.
  • Housing is often included in core inflation calculations due to its stable and significant contribution to household expenses.
• Housing in CPI:
  • Housing costs include rent, utilities, property taxes, and maintenance expenses.
  • The weight of housing in CPI reflects its importance in consumer spending patterns.
• Global Practices:
  • Different countries assign varying weights to housing in CPI, influenced by economic and cultural factors.
  • For example, the US Bureau of Labor Statistics incorporates "shelter" as a major component of CPI, while other countries may use alternative methods.