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Word Count: 727
The consumer price index is an economic statistic used to measure the price changes of one good or a group of goods from one year to the next or from one month to the next The group of items that is being measured normally consists of four hundred goods and services that a typical family of four would consume which is referred to as the market basket The market basket is subdivided into six categories each of which is assigned a different weight of importance towards the countries total CPI The categories include food and beverage accounting for nineteen percent housing and utilities 377 percent clothes and maintenance 52 percent transportation 218 percent medical care six percent and other goods and services 103 percent The CPI can be calculated for a single product one of these six subdivisions or for the economy as a whole The CPI serves as a measure of the inflation or deflation that a product or country experiences from one year to the next In order to determine the consumer price index a base year must be determined The base year is the original year in which data was collected and the year to which one makes all of the comparisons The base year is given a value of 100 As the percentage of this original price changes you either add or subtract that percent from your base year For example if the CPI increased ten percent from one year to the next the original value would equal 100 and the new CPI would equal 110 It could also be said from this that inflation increased ten percent Therefore it is a measure of inflation because what 100 dollars bought during the base year would cost 110 dollars during this new year Information to determine the CPI in the United States is collected from 87 urban areas including 50000 households and 23000 retail establishments in each area In my graph and
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