Chapter 9: Problem 21

Name several forms of indexing in the private and public sector.

Short Answer

Expert verified

Several forms of indexing in the private and public sector include the following: 1. Private Sector - Stock Market Index: Examples include the S&P 500 and Dow Jones Industrial Average, which track the overall performance of a group of stocks representing the market as a whole or a specific market segment. 2. Private Sector - Retail Price Index (RPI): This index measures the changes in prices of a fixed basket of consumer goods and services over time, representing the cost of living. 3. Public Sector - Consumer Price Index (CPI): Calculated by the Bureau of Labor Statistics, the CPI monitors the average price changes of consumer goods and services purchased by households in urban areas. 4. Public Sector - Human Development Index (HDI): The United Nations Development Programme computes the HDI as a composite index of life expectancy, education, and per capita income indicators. 5. Cross-sector - Environmental Performance Index (EPI): Developed by researchers at Yale and Columbia University, the EPI ranks countries based on their environmental performance in various categories, including air quality, biodiversity, and water resources.

Step by step solution

Form 1: Private Sector - Stock Market Index

One form of indexing in the private sector is the stock market index. For example, a stock market index like the S&P 500 or Dow Jones Industrial Average tracks the overall performance of a group of stocks representing the market as a whole or a specific market segment. Investors and businesses use these indices to measure and compare the performance of their investments or analyze market trends.

Form 2: Private Sector - Retail Price Index (RPI)

The Retail Price Index (RPI) is another type of indexing used in the private sector. It measures the changes in prices of a fixed basket of consumer goods and services over time, representing the cost of living. Many businesses use the RPI to assess inflation and adjust their pricing strategies, employee wages, and benefit levels accordingly.

Form 3: Public Sector - Consumer Price Index (CPI)

A widely-used index in the public sector is the Consumer Price Index (CPI). The Bureau of Labor Statistics calculates this index to monitor the average price changes of consumer goods and services purchased by households in urban areas. It is an essential tool for governments and policymakers to observe inflation and develop policies to maintain price stability.

Form 4: Public Sector - Human Development Index (HDI)

Another form of indexing in the public sector is the Human Development Index (HDI). The United Nations Development Programme (UNDP) computes the HDI as a composite index of life expectancy, education, and per capita income indicators. It is a significant measure to assess and compare overall human development in different countries and to allocate resources for targeted improvements in healthcare, education, and economic growth.

Form 5: Cross-sector - Environmental Performance Index (EPI)

The Environmental Performance Index (EPI) is a form of indexing applicable to both the private and public sectors. Developed by researchers at Yale and Columbia University, the EPI ranks countries based on their environmental performance in various categories, including air quality, biodiversity, and water resources. Governments, businesses, and NGOs can use this index to identify areas that require improvement and develop strategies for sustainable development.