ECO 304L Chapter 11-1: 11.1 The Consumer Price Index
14 Feb 2017
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Document Summary
The consumer price index (cpi): a measure of the overall cost of the goods and services bought by a typical customer: how the cpi is calculated. How the typical consumer divides spending among various categories of goods and services. Core cpi: a measure of the overall cost of consumer goods and services excluding food and energy. Because food and energy prices show substantial short-run volatility, the core cpi better reflects ongoing inflation trends. Producer price index (ppi): a measure of the cost of a basket goods and services bought by firms. The cpi tries to gauge how much incomes must rise to maintain a constant standard of living. Consumers respond to these prices by buying less of the goods whose prices have risen by large amounts and buying more of goods whose prices have risen less or perhaps even fallen.
