|
CPI
|
|
|
Base Year
|
Current Year
|
|
Goods
|
Quantities
|
Prices
|
Total Exp.
|
Quantities
|
Prices
|
Total Exp.
|
|
|
q0
|
P0
|
q0 ´ P0
|
q1
|
P1
|
q1 ´ P1
|
|
A
|
10
|
6
|
60
|
9
|
7
|
63
|
|
B
|
8
|
10
|
80
|
7
|
12
|
84
|
|
C
|
16
|
3
|
48
|
15
|
3.5
|
52.5
|
|
åq0 P0
= 188
|
åq1 P1
= 199.5
|
The CPI value is therefore:
 Therefore CPI value over this period has increased by 6.11 percent. The rise in the CPI is considered the rise in the price level or the rate of inflation. Note that base year expenditure value is equated to 100 therefore the CPI index value for the base year is 100.
It is a matter of both convenience and convention to assume base year value as 100. This enables us to compare with a similar value of any other year and to state the difference as a percentage change.
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