Consumer Price Index
Consumer Price Index (CPI)
Consumer Price Index (CPI) /kənˈsjuːmər praɪs ˈɪndɛks/ is an economic measurement that estimates the average price of consumer goods and services purchased by households. The CPI is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically.
Etymology
The term "Consumer Price Index" originates from the field of Economics, where "Consumer" refers to an individual or household that purchases goods and services for personal use, "Price" refers to the amount of money expected, required, or given in payment for something, and "Index" is a statistical measure of changes in a representative group of individual data points.
Calculation
The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in the CPI are used to assess price changes associated with the cost of living.
Related Terms
- Inflation: The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.
- Deflation: The decrease in the general price level of goods and services.
- Purchasing Power: The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy.
- Economics: The branch of knowledge concerned with the production, consumption, and transfer of wealth.
See Also
External links
- Medical encyclopedia article on Consumer Price Index
- Wikipedia's article - Consumer Price Index
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