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Difficulty: MediumInflation Types, Price Indices (CPI, WPI), and Price Control Mechanisms

Match the inflation types and phenomena listed in List-I with their corresponding economic characteristics listed in List-II.

  • ShrinkflationThe commercial practice of reducing product weight or quantity while retaining the original retail price.
  • SkewflationInflationary price rise localized to one or a small group of essential commodities while overall price levels remain stable.
  • Headline InflationTotal inflation figure based on the full commodity basket, inclusive of volatile food and fuel prices.
  • Core InflationLong-term persistent price index measure calculated by excluding volatile food and fuel components.

Answer

Shrinkflation matches with the reduction of product quantity at constant retail price; Skewflation matches with price rise concentrated in a specific group of commodities; Headline Inflation matches with total inflation including food and fuel; and Core Inflation matches with persistent inflation excluding food and fuel.
Shrinkflation is characterized by hidden price increases where packaging size drops while retail price stays fixed. Skewflation describes price inflation concentrated within limited specific items like food products. Headline Inflation represents total price variation across the entire representative consumer basket. Core Inflation excludes volatile components such as food and energy to reflect long-term underlying inflationary trends.

Step-by-Step Solution

1
Identify the characteristic of Shrinkflation
Shrinkflation corresponds to maintaining the price sticker while reducing volume, weight, or count of the product.
Firms use this subtle cost-pass-through method when input costs rise without triggering consumer price resistance.
2
Identify the characteristic of Skewflation
Skewflation denotes price increases concentrated within one or a few sectors while prices in other sectors remain moderate or flat.
It highlights sectoral supply bottlenecks rather than generalized monetary expansion.
3
Distinguish between Headline Inflation and Core Inflation
Headline inflation evaluates the entire consumer price index basket, whereas Core inflation filters out volatile food and fuel items.
Excluding temporary supply-side price spikes in food and fuel reveals persistent macroeconomic monetary pressure.

Key Concept

Inflation Types, Price Indices, and Structural Inflationary Dynamics
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Topics

Inflation Types, Price Indices (CPI, WPI), and Price Control Mechanisms