Consumer Price Index (CPI)

Consumer Price Index (CPI):

• is a measure estimating the average price of consumer goods and services purchased by households.
• the percent change in the CPI is a measure estimating inflation.
• also known as cost of living index.
• such an index would show how consumer expenditure would have to move to compensate for price changes so as to allow consumers to maintain a constant standard of living.

FORMULA FOR CALCULATING THE INFLATION:

Example:
The formula for calculating the Inflation Rate looks like this:

Inflation Rate = ((B - A) / A) * 100

Lets assume for simplicity,
At 2008, the CPI was 180 and today the CPI is 168, the calculation will be:

Inflation Rate = ((180 – 168) / 168) * 100
                    = (12 / 168) * 100
                    = 0.07143 * 100
                    = 7.14 %

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the blogger.