The Consumer Price Index (CPI) is used to measure changes in prices over time of consumer goods and services that households purchase. The CPI examines the average price of items in a consumer basket, including goods and services like medical care and transportation. Changes in the CPI are important for countries to assess cost of living and develop economic policies, and the index is used to adjust payments like wages and pensions for inflation. In the US, the Bureau of Labor Statistics computes two main CPI statistics to track price changes for urban consumers.

1. Consumer Price Index
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2. Introduction
 CPI refers to an indicator of price variation in
the prices of consumer goods.
 This is as well as services that are bought by
households.
 CPI measures changes in the price levels of
services and goods that people in a country
purchase over time.
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3. Consumer Price Index (CPI)
 It examines the average price of the consumer
basket of goods bought and the services hired by
consumers .
 These include medical care and transportation.
 It is calculated by averaging changes in the price
of items in predetermined baskets.
 Changes in consumer price index is important.
 It helps countries in assessing changes in price
that are associated with living standards.
 It also involves the cost of living and coming up
with appropriate economic policies.
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4. Importance of CPI
 It is used in escalating a particular dollar value
with time.
 This helps in preserving buying power of a
given dollar value.
 This implies that CPI is used in adjusting
contracted payments like rent, wages etc.
 CPI is also used to escalate public and private
pension programs, social payments, and tax
deductions.
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5.  Different economic aggregates are also deflated
using consumer price index.
 These can be income inflows that are used to
obtain income estimates based on a constant
dollar.
 Banks also use CPI in setting and monitoring the
implementation of different economic policies.
 Economists and business analysts also use the
consumer price index to analyze and research
economic trends and issues in a country.
 weighs price movements of consumer goods and
services on the basis of their relative importance
in the overall consumers’ expenditure.
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6. CPI In the US
 The Bureau of Labor Statistics computes CPI in
the United States.
 It measures two types of consumer price index
statistics.
 One type of CPI statistics is the CPI for the urban
income earners and the clerical workers.
 The other type is the CPI of all urban consumers.
 CPI for all urban consumers provides the best
statistics.
 It represents the public in general and it accounts
for approximately 87 percent of the entire
population.
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7.  Consumer price index is commonly used in
identifying durations of deflation and
inflation.
 A rapid rise in consumer price index denotes
inflation while a sharp drop in consumer price
index within short duration indicates
deflation.
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8. For More Information About
Consumer Price Index
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