CHAPTER 6

# CHAPTER 6 - CHAPTER 6 Measuring the cost of living -...

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CHAPTER 6 – Measuring the cost of living - Consumer price index (CPI) is used to monitor changes in standards of living for family. When CPI rises, a typical family has to spend more to maintain the same standard of life. - Inflation rate: The % change in the price level from the previous period. The consumer price index - CPI: the measure of the overall cost of the goods and services bought by a typical consumer. - How the consumer price index is calculated - Determine the basket. – Stats Can figures out which goods consumers spend the most on. - Find the prices. – Then we need to find the price of each item in the “basket” at a time. - Compute the basket’s cost – Use the data on prices to calculate the cost of the basket of goods and services at different times. - Choose a base year and compute the index – designate on year as the base year. CPI = [price of basket goods / services in one year] x 100 Compute the inflation rate Inflation rate in year 2 = [CPI in yr 2 – CPI in yr 1

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## This note was uploaded on 04/13/2010 for the course CA 1001 taught by Professor James during the Spring '06 term at Buffalo State.

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CHAPTER 6 - CHAPTER 6 Measuring the cost of living -...

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