what is idiot index?

In simple terms idiot index stands for PRICE of a product to the Actual VALUE of the product

The Idiot index shows the ratio of what something actually costs , to cost of manufacturing it which includes raw material , machines and human resources etc.

LETS TAKE AN EXAMPLE FOR BETTER UNDERSTANDING OF IDIOT INDEX.

lets say you have brought a CHOCOLATE(250gm) for 10 gold coins , your friend finds it expensive and he decides to do a bit of research on why does the chocolate costs 10 Gold coins and he applies first principles thinking to it and he finds out for 1 kilogram of coca powder it costs 1 gold coin and the rest ingredients are available for 1 gold coin and the whole process may cost of 1Gold coin. that’s total of 3 gold coin for 1 kilogram of chocolate. But you bought it for 10 Gold coins.

Now according to idiot index Chocolate has the ratio of 10:3 , it costs you more when you buy it , it cheaper when make it from scratch.

WHAT CAN YOU TAKE AWAY FROM IDIOT INDEX ?

The higher the ratio between something costs to the Actual value of the product, the more expensive it is.

THE MORE THE RATO , LESSER VALUE FOR MONEY DEAL IT’S GOING TO BE.

The ratio of cost of a product to its actual value ,can help us to make better financial decisions.

idiot index very useful to identify a over-priced product , and helps us to avoid paying too much for something that is not worth as it costs.

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