Question:

What is consumer price index?

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and what do the numbers that come with it mean?

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  1. The Index that tracks all the little widgets you pay for at the retail level.  Everything from a gallon of milk at the supermarket to razor blades or orange juice...


  2. It is a widely used indicator of inflation or a measure of the cost of living.

    Inflation means a sustained trend of rising prices.

    The CPI prices are measured against a base year, in Canada it is 1992. So if this year the index is 125, this indicates that a basket of goods(canada uses a basket of 600 different goods) costs approx. 25% more now than in 1992.

    So if the CPI this year was 125 and the CPI last year was 123, the inflation rate over the last year was (125-123/123)*100 which equals approx. 1.62%. Prices rose 1.62% from the previous year. It costs you approx. an additional 1.62% to buy the same product this year than it did  last year.

  3. Consumer Price Index (CPI) is an index that measures the average price of a "basket" of consumer goods and services.

    CPI is indexed against a base year and the change in CPI represents a measure of inflation.

    For example, if CPI was indexed to the year 2000, the index would in 2000 would be 100. If in 2001, the index was now at 102, this would represent 2% inflation in that basket of goods.

    If now in 2008, the index was at 120, that would mean that since the year 2000, the average prices of the goods and services in this "basket" would have increased by 20%.

    To find the inflation for 2008, you would look at the change in CPI between 2007 and 2008. For example, if in 2007 CPI was 117, inflation would be

    (120 - 117) / 117 = 2.56%

  4. they take a shopping list (called "a basket"), and compute it's cost using prices from different moments in time. Then they rescale these costs so the cost in base year is 100. Rescale means divide all costs by the same number.

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