Price Indexes
A price index is a measure of the relative changes in the prices of a basket of goods and services over time. The most common price indexes are the Consumer Price Index (CPI) and the Producer Price Index (PPI).
The CPI measures the average changes in prices paid by consumers for a basket of goods and services. The CPI is used to measure inflation. The PPI measures the average changes in prices paid by producers for a basket of goods and services. The PPI is used to measure producer inflation.
Both the CPI and PPI are calculated using a base year. The CPI is calculated using 2012 as the base year, while the PPI is calculated using 2010 as the base year. In order to calculate the index, prices for each item in the basket are collected in both the base year and the current year. These prices are then compared, and an index value is calculated.
The CPI and PPI are important economic indicators. They allow policy makers to track inflation and make decisions accordingly.
