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 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 – – – –

Calculate Inflation Between 2003 & 2004 (P2 – P1)/P1 x 100 ( )/ 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 (1990 = 100) Inflation between Jan 2000 and Feb 2000 is 2.1% Then February index will be: x = (1986=100)

CPI Exercise YearCPI

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

CPI Exercise A) ( )/75.0 x 100 = 38.93% = inflation between 1985 and 1995 Prices in 1995 = x =

Another way to get the same answer Use of cross multiplication: 7575 = ? x ÷75 = Due to rounding issues, the answers are slightly different. However, both method/answers are acceptable. CPIIncome ?

ion-rate/canada-inflation-rate