The Consumer Price Index – CPI

The most commonly used measure of the level of prices is the consumer price index (CPI).

For example, suppose that the typical consumer buys 5 batteries for bikes and 2 bike recharges every month. Then the basket of goods consists of 5 batteries for bikes and 2 bike recharges, and the CPI is

In this CPI, 2009 is the base year. The index tells us how much it costs now to buy 5 batteries for bike and 2 bike recharges relative to how much it cost to buy the same basket in 2009.

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