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Statistic: Price Index

Price indexes are statistical measures used to compare prices of goods and services over time or between locations. They are weighted averages of price relatives that allow for comparison of price levels and inflation. Common types of price indexes include the consumer price index (CPI) which measures inflation for households, producer price index (PPI) for producers, and GDP deflator which adjusts GDP for inflation. Price indexes use fixed or changing market baskets and are important economic indicators.

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133 views3 pages

Statistic: Price Index

Price indexes are statistical measures used to compare prices of goods and services over time or between locations. They are weighted averages of price relatives that allow for comparison of price levels and inflation. Common types of price indexes include the consumer price index (CPI) which measures inflation for households, producer price index (PPI) for producers, and GDP deflator which adjusts GDP for inflation. Price indexes use fixed or changing market baskets and are important economic indicators.

Uploaded by

Leonora Erika Rivera
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© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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index number A number indicating change in magnitude, as of price, wage, employment, or production shifts, relative to the magnitude at a specified

point usually taken as 100. A statistic which assigns a single number to several individual statistics in order to quantify trends. The best-known index in the United States is the consumer price index, which gives a sort of "average" value for inflation based on price changes for a group of selected products. The Dow Jones and NASDAQ indexes for the New York and American Stock Exchanges, respectively, are also index numbers. Let be the price per unit in period , be the quantity produced in period , and be the value of the units. Let be the estimated relative importance of a product. There are several types of indices defined, among them those listed in the following table. index Bowley index Fisher index geometric mean index abbr. formula

harmonic mean index

Laspeyres' index marshall-Edgeworth index mitchell index Paasche's index

Walsh index Price index A price index (plural: price indices or price indexes) is a normalized average (typically a weighted average) of price relatives for a given class of goods or services in a given region, during a given interval of time. It is a statistic designed to help to compare how these price relatives, taken as a whole, differ between time periods or geographical locations.

Price indexes have several potential uses. For particularly broad indices, the index can be said to measure the economy's general price level or a cost of living. More narrow price indices can help producers with business plans and pricing. Sometimes, they can be useful in helping to guide investment.

Consumer price index Producer price index GDP deflator

A consumer price index (CPI) measures changes in the price level of a market basket of consumer goods and services purchased by households. The CPI in the United States is defined by the Bureau of Labor Statistics as "a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services."[1] The CPI is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically. Sub-indexes and sub-sub-indexes are computed for different categories and sub-categories of goods and services, being combined to produce the overall index with weights reflecting their shares in the total of the consumer expenditures covered by the index. It is one of several price indices calculated by most national statistical agencies. The annual percentage change in a CPI is used as a measure of inflation. A CPI can be used to index (i.e., adjust for the effect of inflation) the real value of wages, salaries, pensions, for regulating prices and for deflating monetary magnitudes to show changes in real values. In most countries, the CPI is, along with the population census and the USA National Income and Product Accounts, one of the most closely watched national economic statistics.

Producer price index


A Producer Price Index (PPI) measures the average changes in prices received by domestic producers for their output. It is one of several price indices. Its importance is being undermined by the steady decline in manufactured goods as a share of spending.

GDP deflator
In economics, the GDP deflator (implicit price deflator for GDP) is a measure of the level of prices of all new, domestically produced, final goods and services in an economy. GDP stands for gross domestic product, the total value of all final goods and services produced within that economy during a specified period.

Like the Consumer Price Index (CPI), the GDP deflator is a measure of price inflation/deflation with respect to a specific base year; the GDP deflator of the base year itself is equal to 100. Unlike the CPI, the GDP deflator is not based on a fixed basket of goods and services; the "basket" for the GDP deflator is allowed to change from year to year with people's consumption and investment patterns.

price index
Measure of change in a set of prices, consisting of a series of numbers arranged so that a comparison of the values for any two periods or places will show the change in prices between periods or the difference in prices between places. Price indexes were first developed to measure changes in the cost of living in order to determine the wage increases necessary to maintain a constant standard of living. There are two basic types. Laspeyres-type indexes define a market basket of goods in a base period, then use the prices for those goods to examine change over space and time. In its simplest form, this is simply the ratio of what those goods cost today to what they cost in the base period. The two most familiar indexes of this type are the consumer price index (CPI) and the producer price index (PPI). The CPI measures changes in retail prices in such component parts as food, clothing, and shelter. The PPI (formerly called the wholesale price index) measures changes in the prices charged by manufacturers and wholesalers. Paaschetype indexes define a market basket of goods in the current period, then use the prices of those goods from past periods. The most familiar index of this type is the GDP deflator, used in the U.S. in the national income accounting to differentiate amounts in constant dollars from those in current dollars.An index number expressing the level of a group of commodity prices relative to the level of the prices of the same commodities during an arbitrarily chosen base period and used to indicate changes in the level of prices from one period to another.

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