1. Consumer Price Index (CPI)

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

3. 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

4. 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.

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

6. 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

7. Another example: Using inflation to calculate consumer price index

8. 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 (1986=100)

9. CPI Exercise YearCPI 197024.2 197534.5 198052.4 198575.0 199093.3 1995104.2

10. 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

11. 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 = 25702.15

12. Another way to get the same answer Use of cross multiplication: 7575 = 18500 76104.2 ? 104.2 x 18500 ÷75 = 25702.67 Due to rounding issues, the answers are slightly different. However, both method/answers are acceptable. CPIIncome 19857518500 1995104.2?

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