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CPI Calculation

The document explains how to measure inflation using the Consumer Price Index (CPI), which compares the cost of a basket of goods and services over different years. It outlines the steps to find the value of the basket, calculate the CPI, and determine the inflation rate. The document includes a table for calculating the values and CPI for the years 2015 to 2018.

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Sahana Rao
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8 views2 pages

CPI Calculation

The document explains how to measure inflation using the Consumer Price Index (CPI), which compares the cost of a basket of goods and services over different years. It outlines the steps to find the value of the basket, calculate the CPI, and determine the inflation rate. The document includes a table for calculating the values and CPI for the years 2015 to 2018.

Uploaded by

Sahana Rao
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

MEASURING INFLATION

CPI or Consumer Price Index is a measure of the cost of living for the typical
household and compares the value of a basket of goods and services in one year
with the value of the same basket in a vase year.
STEP 1: FIND THE VALUE OF THE BASKET

Product Quantit Price Value Price Value Price Value Price Value
y in in of the in of the in of the in of the
basket 2015 basket 2016 basket 2017 baske 2018 baske
(£) (£) (£) t (£) t

Pizza 25 7 6 7 6

Movie 9 15 17 18 18
tickets

Bus rides 47 2 4 4 3

STEP 2: CALCULATE CPI

Value of basket ∈a specific year


Price index for a specific year = × 100
Value of same basket ∈base year
Working for CPI

Year 2015 2016 2017 2018


Value of the
basket

CPI
STEP 3: CALCULATE INFLATION RATE

CPI of year 1−CPI of year 0


Inflation rate= ×100
CPI of year 0

Inflation rate calculation

Year 2016 2017 2018

Inflation rate

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