Difference between revisions of "Calculate CPI"
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| − | The Consumer Price Index (CPI) is a measure of changes in product costs over a specific time period, and it is used as both an indicator of the cost of living and economic growth. In the United States, the official CPI is calculated based upon aggregated data regarding the price of common consumer items in certain urban districts.<ref>http://stats.bls.gov/cpi/cpifaq.htm#Question_1</ref> This article will explain how you can calculate CPI on your own. | + | The Consumer Price Index (CPI) is a measure of changes in product costs over a specific time period, and it is used as both an indicator of the cost of living and economic growth. In the United States, the official CPI is calculated based upon aggregated data regarding the price of common consumer items in certain urban districts.<ref name="rf1">http://stats.bls.gov/cpi/cpifaq.htm#Question_1</ref> This article will explain how you can calculate CPI on your own. |
| − | [[Category:Probability and Statistics]] | + | [[Category: Probability and Statistics]] |
== Steps == | == Steps == | ||
===Making a Sample Calculation of the CPI=== | ===Making a Sample Calculation of the CPI=== | ||
| − | #Find a record of past prices. Grocery receipts from the past year would work well for this purpose. For accurate calculations, use a sampling of prices based on a relatively brief period of time--perhaps just one or two months of the previous year.<ref>http://inflationdata.com/inflation/Inflation_Articles/CalculateInflation.asp</ref> | + | #Find a record of past prices. Grocery receipts from the past year would work well for this purpose. For accurate calculations, use a sampling of prices based on a relatively brief period of time--perhaps just one or two months of the previous year.<ref name="rf2">http://inflationdata.com/inflation/Inflation_Articles/CalculateInflation.asp</ref> |
#*If you are using old receipts, make sure that they have the date on them. Simply knowing that the prices listed are not current does not illustrate any real point. The change in CPI is only relevant if calculated for a specifically quantifiable amount of time. | #*If you are using old receipts, make sure that they have the date on them. Simply knowing that the prices listed are not current does not illustrate any real point. The change in CPI is only relevant if calculated for a specifically quantifiable amount of time. | ||
#Add together the prices of the items purchased previously. Using the record of past prices, add together a sampling of those product prices. | #Add together the prices of the items purchased previously. Using the record of past prices, add together a sampling of those product prices. | ||
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#*Positive results represent the rate of inflation; negative numbers reflect deflation (a rare fairly rare phenomenon in most of the world since the mid-twentieth century). | #*Positive results represent the rate of inflation; negative numbers reflect deflation (a rare fairly rare phenomenon in most of the world since the mid-twentieth century). | ||
===Calculating Price Changes for a Single Item=== | ===Calculating Price Changes for a Single Item=== | ||
| − | #Find the price of a single item that you purchased in the past. Try to find something that you have an exact number for, and that you have recently purchased as well.<ref | + | #Find the price of a single item that you purchased in the past. Try to find something that you have an exact number for, and that you have recently purchased as well.<ref name="rf2" /> |
#Find the current price of the same item. It is best to compare the prices of the same brand of item that was purchased as the same store. Again, the purpose of CPI is not to determine how much you are saving by shopping at a different store or switching to generic brands. | #Find the current price of the same item. It is best to compare the prices of the same brand of item that was purchased as the same store. Again, the purpose of CPI is not to determine how much you are saving by shopping at a different store or switching to generic brands. | ||
#*Also avoid comparing sale items. The official CPI calculated by the Federal Bureau of Labor Statistics uses a large number of items found in a variety of locations in order to eliminate short-term fluctuations. Calculating the change for individual items is still worthwhile, but sales are another variable that should be eliminated. | #*Also avoid comparing sale items. The official CPI calculated by the Federal Bureau of Labor Statistics uses a large number of items found in a variety of locations in order to eliminate short-term fluctuations. Calculating the change for individual items is still worthwhile, but sales are another variable that should be eliminated. | ||
