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Consumer price index

Consumer price index - Construction of a price index As an...

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Consumer price index . The GDP deflator is not the only index measure of the price  level. Among the many other price indices, the  consumer price index (CPI)  is the most  frequently cited. The CPI differs from the GDP deflator in two important ways. First, the  CPI measures only the change in the prices of a “basket” of goods consumed by a  typical household. Second, the CPI uses base year quantities rather than current year  quantities in calculating the price level index value. The formula for the CPI is given as 
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Unformatted text preview: Construction of a price index . As an example of a CPI index, assume for the sake of simplicity that the basket of goods consumed by a typical household consisted of just three goods: pizza, soda, and ice cream. The quantities consumed of each of these three goods in the base year are given in Table 1 , along with the prices of these three goods in both the base year and the current year....
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