Calculating CPI

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Five steps to calculating CPI

1. Determine the basket
2. Find the prices
3. Compute the basket's cost
4. Choose a base year and compute the index
   • $CPI={\frac {\mathrm {Price\ of\ basket\ of\ goods\ or\ services\ in\ one\ year} }{\mathrm {base\ year} }}\times 100$
5. Compute the inflation rate
   • $Inflation={\frac {\mathrm {CPI\ in\ year\ 2\ -\ CPI\ in\ year\ 1} }{\mathrm {CPI\ in\ year\ 1} }}\times 100$

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