Cpi basket of goods list

The aim is to measure how consumers’ purchasing power is affected by rising prices. There are three main steps to measuring inflation

1. Give a weighting to the importance of different goods to the typical basket of goods.
2. Measure the change in price
3. Convert into the index – multiplying the weight by the price change.

Steps

• 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.

• In the UK the top 12 categories of goods and services are

• This basket of goods gives a relative importance to each different item.

  E.g. if gas and electricity prices increase by 10% this would have a higher weighting than an increase in the price of avocados.

• 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.
• To calculate inflation we multiply the weighting of th
  how is cpi inflation rate measured
  how is inflation calculated using cpi