Price Indices LG: I can describe various indices used in the media and I can use these indices to solve problems.

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Presentation transcript:

Price Indices LG: I can describe various indices used in the media and I can use these indices to solve problems

What is a Price Index? A Price Index describes the price of an item compared to a base value measured at a particular time or in a particular place. Price indices help citizens, industries and businesses follow and predict trends in pricing.

Consumer Price Index (CPI) The CPI is a measure of the change in price of common household items – Calculated by determining the average cost of 600 popular goods and services The average annual percentage change in the CPI is a measure of inflation.

Canadian CPI Trends If a car costs $ in 2014 and the same model cost $ in 2002, what is the percent price increase?

CPI Weights Different items account for different percentages of the CPI

Interpreting the CPI What is the base year for the CPI? How long did it take the cost of the basket of goods to double from the base year? What is the CPI value for 2000? What does this mean?

Making Predictions Based on the CPI Using the graph, determine the average rate of inflation (% per year) from January 2009 – January 2014 Predict the CPI value in 2018

Using an Index to Make Comparisons UBS financial services generated a report in 2012 which included a comparison of clothing prices in 71 cities. a)What city determines the base price for clothing? b)Which cities have and index value less than 100? What does this tell you? c)How do clothing prices in Hong Kong and Tokyo compare to Toronto? d)If Sydney was now used to determine the base price, how would the other values be affected? CityClothing Index Toronto74.2 New York100.0 Dublin68.3 Tokyo199.2 Rome111.7 Honk Kong65.0 Zurich147.5 Stockholm129.2 Sydney90.0

Other Types of Indices Not all indices use a ‘base value’ for comparison – Example: Body Mass Index (BMI) – ratio of height to weight BMI

Homework Pg. 237 # 1 – 6