1. Business Math JOHN MALL JUNIOR/SENIOR HIGH SCHOOL

2. Economic Statistics

3. Consumer Price Index (CPI)

4.  It is a widely reported measure of how much the prices of goods and services typically bought by consumers have changed when compared to a base period.  A base period is a period of time with which comparison are made.  The base period for most of the items in CPI is 1982-9184 Consumer Price Index (CPI)

6.  The CPI may be expressed in several ways. For example, the CPI for “All Items” in 2003 is 184.0  This means that the cost of goods in 2003 was 184% of their cost in the base period.  The percent increase in prices from the base period is 84%.  Looking at the relationship in another way, it cost $184 in 2003 to buy the same goods which you would have paid in the base period. Consumer Price Index (CPI)

7.  The CPI uses a single number called an Index Number to compare price changes to the base period. The index number for the base period is always equal to 100.  The historical report of the CPI shows index numbers of various categories of consumer goods and services. Consumer Price Index (CPI)

8.  Use the CPI Table, by what percent did the CPI for Apparel increase from the base period to 1994?  30.5%  To 2003?  19% Checking for Understanding

9.  For consumers, business firms, organizations and the government, inflation means that the prices of goods and services that they buy are rising.  The US Department of Labor publishes the Consumer Price Index report that tells how much inflation has occurred within the past year.  A calculation in the report, called the rate of inflation, shows the percent increase in prices from the previous year. Rate of Inflation

10.  The CPI Table shows an index number of 179.9 for 2002 and an index number of 184.0 for 2003. What was the rate of inflation for 2003, to the nearest tenth percent?  184. 0 – 179.9 = 4.1  4.1 / 179.9 = 0.228 or 2.3%  The rate of inflation for 2003 was 2.3%  The inflation rates are expressed as percentages. If CPI is 2.3%, this means that on average, the price of products and services we buy is 3% higher than a year earlier. Example

11.  Find the rate of inflation for 1999, to the nearest tenth percent  2.2%  Find the rate of inflation for the Medical Care Category for 2002  4.7% Checking for Understanding

12.  When inflation occurs, each dollar buys less than it did in the past.  Suppose a Department of Labor report shows that the purchasing power of a dollar in 2003 is $ 0.54.  In the base period, 1982-1984, the dollar was worth its full value of $1.00.  In 2003, the dollar was worth $0.53 compared to the base value.  This means that a 2003 dollar could buy only about $0.54 worth of the same goods that could have been bought in 1982-1984 Purchasing Power of Dollar

13.  Use the CPI Table to calculate the purchasing power of the dollar for $2,000, to the nearest 10 th of a cent.  172.2: CPI index for 2000100: CPI index for base period  100 / 172.2 = 0.5807 or 0.581 or $0.581 Example

14.  Use the CPI Table to find the purchasing power of the dollar in 2002 to the nearest tenth of a cent.  $0.556  Use the CPI Table to find how much a 1997 dollar is worth compared to 1982-1984, to the nearest tenth of a cent.  $0.623 Checking for Understanding

15. Consumer Price Index (CPI)