Podcast
Questions and Answers
To calculate the percentage change representing inflation, one should analyze the ______ change of a specific quantity.
To calculate the percentage change representing inflation, one should analyze the ______ change of a specific quantity.
value
In the formula $P = \frac{p_1 * q_0}{p_0 * q_0} * 100$, '$p_1$' represents the price of the ______ year, essential for gauging price changes over time.
In the formula $P = \frac{p_1 * q_0}{p_0 * q_0} * 100$, '$p_1$' represents the price of the ______ year, essential for gauging price changes over time.
reporting
When calculating the value of a shopping basket, the prices of individual products in both the base and reference years are multiplied by the ______ in the base year.
When calculating the value of a shopping basket, the prices of individual products in both the base and reference years are multiplied by the ______ in the base year.
quantity
The Consumer Price Index (CPI) involves dividing the value of the shopping basket in the reporting year by the value of the shopping basket in the ______ year.
The Consumer Price Index (CPI) involves dividing the value of the shopping basket in the reporting year by the value of the shopping basket in the ______ year.
To find the price increase percentage, which is equivalent to inflation, use the formula $\frac{(VPI_{new}; - ; VPI_{old}) * 100}{VPI_{old}}$, where $VPI$ stands for ______ Price Index.
To find the price increase percentage, which is equivalent to inflation, use the formula $\frac{(VPI_{new}; - ; VPI_{old}) * 100}{VPI_{old}}$, where $VPI$ stands for ______ Price Index.
Flashcards
Inflation
Inflation
The percentage change in a quantity over time, often indicating rising prices.
Value of a Shopping Basket
Value of a Shopping Basket
Calculated by comparing the cost of a fixed set of goods in the reporting year to the base year.
Consumer Price Index (CPI)
Consumer Price Index (CPI)
Measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Price Increase (%)
Price Increase (%)
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Inflation Formula
Inflation Formula
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Study Notes
- Percentage change in the value of a quantity indicates the inflation.
- The formula to calculate inflation is P = ((p1 * q0) / (p0 * q0)) * 100.
- p1 represents the price in the reporting year.
- p0 represents the price in the base year.
- q0 represents the quantity in the base year.
Value of Goods Basket
- Calculated by summing the product of the price in the base year (p0) and the quantity in the base year (q0) for multiple products.
- Expressed as: p0 * q0 + p0 * q0 + p0 * q0 + ... for the first, second, third products, and so on.
- The price of the product in the base year uses q0, which is the quantity of the product in the base year.
- The price of the product in the reference year uses p1, using q0, which is the quantity of the product in the base year
Consumer Price Index (CPI)
- CPI is calculated as (Value of goods basket in the reporting year / Value of goods basket in the base year) * 100.
- Price increase (in %) also equals Inflation and is calculated as ((CPI new - CPI old) / CPI old) * 100.
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Description
Understand inflation calculation using percentage change and CPI. Learn how to calculate the value of a goods basket and its role in determining the Consumer Price Index. CPI is calculated using goods basket values from the reporting and base years.
