[1] Price index is the average prices of a particular product

CPI: consumer price index
  • acts as the government's inflation gauge (meter)
-adjust tax brackets -adjust social security (so the government needs to know how much money to give social security recipients so that they can purchase their house hold needs) "Market Basket" used in order to calculate cpi= an average assortment of products.

CPI=
(Cost of Base year market basket at current prices ) x 100
(Cost of base year market basket at base year prices)


Constructing CPI:

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went up:
63% 83.7%

*
Base year index is always 100%

The Consumer Price Indexes (CPI) program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services.
The CPI is one of the most watched calculations in America, in addition to the census, and National income and Product accounts.The CPI can be used to calculate changes in wage, pension, salaries, and prices.


I think it is important to note that the statistics put in the equation for the price index are prices from the same given area because if it were from a different place the calculation would be inaccurate. (its also probably something statisticians do behind our backs to make things seem worse or better than they are to manipulate us into giving them MONEY)

CPI measures the rate of inflation.Inflation is the rate at which prices are rising.The Bureau of Labor Statistics (BLS) is in charge of CPI measurement each month.BLS must check prices of the same items multiple times, in multiple parts of the country.CPI measures the cost of living in the United States.CPI can be difficult to measure if the quality changes.

The CPI can be used to index (i.e., adjust for the effect of inflation on the real value of money: the medium of exchange) wages, salaries, pensions, and regulated or contracted prices.

Here is a graph displaying the U.S. consumer price index.
Here is a graph displaying the U.S. consumer price index.



Summary:

The price index is the average cost of products.

SS.D.2.4. The student is able to identify the purpose of the Consumer Price Index and how it is calculated.



  1. ^ http://en.wikipedia.org/wiki/Price_index