Consumer Price Index (CPI)

Slides:



Advertisements
Similar presentations
Price Indexes.
Advertisements

2.4 Index Numbers LEARNING GOAL Understand the concept of an index number; in particular, understand how the Consumer Price Index (CPI) is used to measure.
Appendix to Chapter 1 Defining Aggregate Output, Income, the Price Level, and the Inflation Rate.
Measuring Inflation The Consumer Price Index. Background The Bureau of Labor Statistics (BLS) surveys 30,000 households on their spending habits. It uses.
Baskets, Base Years, and Bias: Constructing and Using a Student Price Index Lesson Objectives 1.Define key terms such as market basket, consumer price.
Chapter 13 Practice Quiz Tutorial Inflation
The Measurement and Calculation of Inflation
Module 15 The Measurement & Calculation of Inflation
Price Stability Average level of prices in the economy is neither increasing nor decreasing.
NOMINAL GDP vs. REAL GDP.
Inflation *.
{ Measuring Inflation Warning: May not be suitable for SL students.
Chapter Measuring the Cost of Living 16. The Consumer Price Index Consumer price index (CPI) – Measure of the overall cost of goods & services – Bought.
Section 3B- Modules 14/15- Inflation and the Business Cycle.
The Measurement and Calculation of Inflation Module 15.
Price Stability - Inflation. What is inflation? Inflation = General Rise in Prices This includes both product/services prices as well as income prices.
Prices for goods, services and wages increase over time. In Australia we measure inflation by using the CPI (consumer price index). The CPI measures the.
Copyright © 2010 Cengage Learning 24 Measuring the Cost of Living.
The Consumer Price Index (CPI)
%change in X -Inflation -Elasticity. GDP/Inflation Inflation rate is measured by using a price index for two years. The consumer price index may give.
Price Indices LG: I can describe various indices used in the media and I can use these indices to solve problems.
Consumer Price Index (CPI). Mariner Stoddard Eccles.
Adjusting for Changes in Medical Care Prices Over Time.
Response Question Talk to the person next to you compare what you came up with for the following questions. What is inflation? What causes inflation? Does.
Section 3D Index Numbers Pages Index Numbers An provides a simple way to compare measurements made at different times or in different places.
INFLATION a rise in the general level of prices. How is it measured? Start with a market basket Hundreds of items over several categories Set a base year.
Consumer Price Index (CPI). CPI Measure of the average rate of price change for a fixed group of goods and services bought by Canadian consumers. Measures.
Consumer Price Index. Federal Government’s Main Goals One of the federal government’s main goals has been to maintain price stability. If the price of.
Consumer Price Index Unit 3 – Lesson 2. CPI- Definition O The Consumer Price Index (CPI) is a measure used by countries to determine the inflation rate.
Chapter 13, Section 2 Price Indexes. Constructing a Price Index Used to measure changes in P. over time Created by selecting a base year and a representative.
Module The Measurement and Calculation of Inflation KRUGMAN'S MACROECONOMICS for AP* 15 Margaret Ray and David Anderson.
CALCULATING INFLATION: PRICE CHANGE, CPI, AND THE GDP DEFLATOR.
Inflation. Inflation at its simplest just means a “general increase in prices”. A more complicated way to look at it is that inflation is a decrease in.
Today’s Schedule – 11/1 Inflation PPT HW: – Read Ch. 13, Section 3 – Start Studying for Unit 4 Test: Tuesday.
Inflation. What is Inflation? Inflation is defined as the sustained increase in the general level of prices for goods and services. The true value of.
Inflation CHAPTER 13 SECTION 2. The Effects of Rising Prices  Inflation  A general increase in prices across an economy  Purchasing Power  The ability.
Consumer Price Index. Federal Government’s Main Goals One of the federal government’s main goals has been to maintain price stability. If the price of.
Inflation Inflation concepts: Explain the difference between general price rises and a price rise in a particular market Distinguish between inflation,
 Inflation (Definition & Measurement) By: Haodi Zhang.
A. A general rise in prices. 1. When prices rise, a person’s ability to buy goods and services goes down, which decreases purchasing power.
 Meaning of Inflation  a rise in the general level of prices  Consumer Price Index ▪ An index that measures the prices of a fixed market basket of goods.
Ms. Park.  Jason Z  Cassie  What is CPI?  A measure of price changes for a typical “shopping basket” of consumer products.  To determine what typical.
 Most common weighted price index used to calculate inflation.  The CPI is calculated four times per year (quarterly) and results from household surveys.
MEASURING THE COST OF LIVING 0. 1 The Consumer Price Index (CPI)  measures the typical consumer’s cost of living  Overall cost of goods and services.
The Measurement and Calculation of Inflation Market Baskets and Price Indices.
Standard SSEMA1b- Define CPI SSEMA1c- Calculate economic measures.
Inflation. Inflation in the United States Inflation is an upward movement in the average level of prices. Its opposite is deflation, a downward movement.
The Consumer Price Index and Value of a Dollar Chapter 5 Lesson.
Inflation Inflation concepts: Explain the difference between general price rises and a price rise in a particular market Distinguish between inflation,
Price Index Calculation See the practice (with answers) on- line as well as Mod 15 in Krugman.
Wages and Home prices Study on acquisition power of individual income.
Measuring the Cost of Living

Inflation *.
Section 3 Module 15.
13-2 GDP And Changes In The Price Level P.P
CPI: Consumer Price Index
How does GDP measure the state of the economy?
Unit Two: Other Indexes.
Components of Expenditure
Inflation and The Consumer Price Index
Inflation Rising prices.
Inflation and CPI What is happening with prices?
Inflation.
Inflation By: Ben Quick.
Inflation Station 5 stations/5 topics
Price Stability Average level of prices in the economy is neither increasing nor decreasing.
Complete the family of four
Өмнөговь аймгийн Нийгэм,
Inflation.
Presentation transcript:

Consumer Price Index (CPI)

CPI Measure of the average rate of price change for a fixed group of goods and services bought by Canadian consumers. Measures inflation

Calculating CPI Obtained by comparing, through time, the cost of a fixed basket of commodities purchased by Canadian consumers in a particular year CPI has a base year that everything gets compared to

CPI Let’s set our base year in 2000 Our basket of goods has 1 loaf of bread This loaf of bread costs $1.00 in 2000. The index value is 100. In 2001, the bread is now $1.25. Now, the price index is 125. In 2002, the bread now costs $1.31. Now our price index in 2002 is 131.

Year – Price Index Value 2000 – 100 2001 – 125 2002 – 131 2003 – 133 2004 - 137

Calculate Inflation Between 2003 & 2004 (P2 – P1)/P1 x 100 (137-133)/ 133 x 100 = 3% CPI this year – CPI last year x 100 CPI last year

Another example: Using inflation to calculate consumer price index

Calculate the price index If index for January 2000 was 119.8 (1990 = 100) Inflation between Jan 2000 and Feb 2000 is 2.1% Then February index will be: 119.8 x 1.021 = 122.3

CPI Exercise Year CPI 1970 24.2 1975 34.5 1980 52.4 1985 75.0 1990 93.3 1995 104.2

CPI Exercise A family of four had an income of 18 500 in 1985 a) approximately what income would they need in 1995 to have the same standard of living

CPI Exercise A) (104.2-75.0)/75.0 x 100 = 38.93% = inflation between 1985 and 1995 Prices in 1995 = 18500 x 1.3893 = 25702.67

Another way to get the same answer CPI Income 1985 75 18500 1995 104.2 ? Use of cross multiplication: 75 = 18500 104.2 ? 104.2 x 18500 ÷75 = 25702.67 Due to rounding issues, the answers are slightly different. However, both method/answers are acceptable.

http://www.rateinflation.com/inflat ion-rate/canada-inflation-rate