Consider the following statements: 1. A price index is a weighted average of the prices of a number of goods and services. 2. Inflation is measured from point-to-point. Which of the statements given above is/are correct?

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: C

Notes:

Explanation: A price index is a weighted average of the prices of a number of goods and services.

In the index the total weight is taken as 100 at a particular year of the past (the base year), this when compared to the current year shows a rise or fall in the prices of current year, there is a rise or fall in the ‘100’ in comparison to the base year—and this inflation is measured in digits.
Inflation is measured ‘point-to-point’. It means that the reference dates for the annual inflation is January 1 to January 1 of two consecutive years (not for January 1 to December 31 of the concerned year).
Similarly, the weekly rate of inflation is the change in one week reference being the two consecutive last days of the week (i.e., 5 p.m. of two Fridays in India).

Source: Ramesh Singh