They do not, price indexes measure the average.

A good example would be rent.  For some people, e.g. young people living with their parents or middle aged people who own their own property, none of their monthly income is spent on rent.  A rise in rental prices has no impact on their cost of living.  For a young person, earning a small salary and paying rent in a city centre however, the rise in rental prices has a much larger impact on their cost of living.

On a periodic basis, the products selected and the weighting attached to each good and service in the basket is reviewed.  For instance 10 years ago, one item in the basket would have been the price of renting film DVDs, but now this item is rarely purchased.  As a result this item will have disappeared from the basket of goods and services measured.  By contrast other items, such as the price of film downloads or a monthly internet packet for a mobile phone will have been added to the basket.

This is not considered, for instance Samsung or Apple smart phone are included in the modern day basket of good and services, yet these bear no resemblance with earlier models of telephones.

Being a measure of changes to consumer prices, the CPI does not include investment items, such as stocks, bonds, real estate, and life insurance as these items relate to savings and not to day-to-day consumption expenses.   The consumer price index also does not calculate changes to the price of the factors of production, which reflect the changing costs to businesses.  Instead these are measured by a different set of indexes such as the commodity price index, which calculates the changes to raw material prices in the economy or a large number of other traded commodity indexes.

This measure of inflation excludes these items because their prices are much more volatile and not an accurate reflection of general price movements throughout the economy.

It measures commodity and labour prices e.t.c. and includes the core items. 

It helps businesses make better performed decisions e.g. contract adjustment and forecasting, stock control e.t.c.

Unsurprisingly both indexes mirror each other, as a change in the prices produced by businesses will always be passed onto the consumer in the long term. 

USA and surprisingly so too is Venezuela.

Just one - UAE.

Hint:

Neither deflation / stagnant inflation or rapid inflation is ideal.  Countries with very low (or negative) inflation may experience a fall in the following areas of the economy:

• investment levels
• consumption
• consumer confidence.

By contrast the Turkey and Venezuela are likely to be faced with different problems.  Both nations are experiencing severe economic difficulties, brought on in large part by a collapse in the value of their national currency, which has placed inflationary pressures on the economy.

In answering this question responses should include the following:

A definition of a low and stable rate of inflation, for example many central banks try to keep inflation within the range 2 - 2.5%.

An explanation of how a low and stable inflation rate causes greater certainty for a business.  This encourages entrepreneurs to investment in new plant and machinery and also encourages overseas investment.  Consumption and economic activity are also likely to flourish.

The impact of a low inflation rate on exporters, for example a low rate of inflation makes domestic goods more competitive in overseas markets and imported goods less competitive.

A recognition that fixed income earners, including those retired people dependent on a pension income, are less at risk from falling real wage levels and that saving is also encouraged.  A low rate of inflation also has social benefits because trade unions are less likely to go on strike because low inflation means that real wage levels are better protected.

On the other hand, the response needs to recognise that low inflation can also have a negative impact on some of the other economic indicators such as unemployment and economic growth.  For example as the AD / AS diagram illustrates, when low inflation is the result of falling AD,  there can be accompanied by a reduction in real output levels from Y1 to Y2.  Similarly, according to some economists there is an inverse relationship between inflation and unemployment, at least in the short term, represented by the Phillips curve, making it difficult to combine both low and stable inflation with low unemployment.             

This implies that rather than maintaining a low and stable rate of inflation, however desirable this might be, might not be possible if governments choose to instead to focus on policies aimed at growth and higher employment.

An example of this can be witnessed in modern day Turkey, a nation with one of the highest rates of inflation in the world, as the government has abandoned any attempt to control average prices and instead prioritise growth policies.

Alternatively a real life example might include nations that have successfuly maintained a low rate of inflation over a period of time e.g. EU, USA and the UK.  For example, a response might discuss the role of the European central bank in maintaining a low rate of interest throughout the Eurozone.

The response should conclude with a consideration of both the long-term and short- term consequences of a sustained period of low inflation, as well as the impact on different stakeholders - creditors, debtors, businesses, customers, exporters and the government, to reach an effective conclusion.