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Suppose that we have a group of K items. Let
be the price of item in the base period;
be the price of item in the base period;
be the price of item in the period of t
The Laspeyres quantity index for the period t is given by
Commonly used index numbers
A) Consumer Price Index
To most of us, inflation has come to mean increased prices and less purchasing power of dollar. The Consumer Price Index (CPI) attempts to measure the overall changes in retail prices of goods and services. The CPI uses a “market basket” of goods and services used by a typical wage earner living in a certain area. The CPI based on items grouped into seven categories, including food, housing, clothing, transportation, medical care, entertainment, and miscellaneous items.
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A weighted aggregate price index | | | Deflating a series by price indexes |