Explore BrainMass

how the Consumer Price Index is calculated

Can anyone find out how the Consumer Price Index (CPI), the primary measure of inflation used by the government, is calculated? Why might this method not reflect the real cost of living increase for the average person?

© BrainMass Inc. brainmass.com June 19, 2018, 7:59 pm ad1c9bdddf

Solution Preview

The CPI is the culmination of a series of many samples. Using data from the most recent Population Census, the Bureau of Labor Statistics (BLS) picks the urban areas from which data on prices were collected and selects the housing units in each area that were eligible for use in the shelter component of the CPI. The Census also gave info on the amount of consumers represented by each area selected as a CPI price collection area. Next, another sample (of about 14,500 families each year) was used as the source for a Point-of-Purchase Survey that noted the places where households purchased specific kinds of goods and services.

source: http://www.bls.gov/cpi/cpifaq.htm

More on the CPI:

The Consumer Price Index (CPI) is one of the most ...

Solution Summary

The expert determines how consumer price index is calculated.