Measuring Inflation: Consumer Price Index (CPI)
- Household expenditure survey - This seeks to measure what people spend their money on. From finding out typical consumption patterns, the statistics body can create a typical basket of goods.
- This basket of goods gives a relative importance to each different item. E.g. if petrol prices increased by 10% this would have a higher weighting than an increase in radios
- The basket of goods is updated each year to take into account changes in expenditure
- Every month changes in the prices of goods and services are monitored and combined into a single figure with using the weights in the basket of gods.
E.G. (1999 all price index is 100)
Good |
Weight |
index in 2000 |
Total Value 2000 |
Bread |
0.10 |
200 |
20 |
Tea |
0.25 |
120 |
20 |
Cloth |
0.25 |
100 |
25 |
Coal |
0.40 |
150 |
60 |
Total |
1.00 |
|
125 |
- Therefore inflation is 25%
In the above example, we assume coal has a weighting of 40% and bread accounts for 10%
Essays and Revision Notes on Inflation
- Definition - Inflation
- Causes Inflation
- Costs of Inflation
- Monetarist Theory
- Criticisms of Monetarism
- Measuring Inflation
- Problems Measuring Inflation
- Money Supply
Inflation Essays
- Discuss the Difficulties of Controlling Inflation
- Does Devaluation Cause Inflation
- Should the Aim of the Government be to Attain Low Inflation?
- Explain What Can Cause a Sustained Increase in the Rate of Inflation
- Essay on Inflation - Is Inflation Harmful?
Measuring Inflation at UK Statistics



