CPI – Consumer Price Index What is the CPI? – A consumer price index (CPI) measures changes in the price level of consumer goods and services purchased.

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Presentation transcript:

CPI – Consumer Price Index What is the CPI? – A consumer price index (CPI) measures changes in the price level of consumer goods and services purchased by households.consumer goodsservices – The CPI, in the United States is defined by the Bureau of Labor Statistics as "a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Bureau of Labor Statisticsmarket basket

CPI – Consumer Price Index What’s in a Market Basket? 1.FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks) 2.HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture) 3.APPAREL (men's shirts and sweaters, women's dresses, jewelry) 4.TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance) 5.MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services) 6.RECREATION (televisions, toys, pets and pet products, sports equipment, admissions) 7.EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories) 8.OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses)

CPI – Consumer Price Index CPI through the years: ftp://ftp.bls.gov/pub/special.requests/cpi/cpia i.txt CPI through the years: ftp://ftp.bls.gov/pub/special.requests/cpi/cpia i.txt

CPI-Consumer Price Index Problems with the CPI: – Market basket items are fixed, while what people are actually buying is constantly changing. – Hard to get an accurate read on true inflation. – CPI based on urban/suburban families. How is rural America represented?