price index
Noun: A statistical measure that tracks and shows the relative changes in the price of a specific good, or a predefined collection (basket) of goods and services, over a period of time. It is a key economic indicator used to monitor inflation or deflation.
The term "price index" is used to discuss economic trends, measure purchasing power, and adjust incomes or contracts. It is typically preceded by a modifier specifying the scope (e.g., consumer, producer, wholesale). - Economists use a price index to measure inflation. - The government publishes the consumer price index monthly. - Pensions are often adjusted according to the retail price index.
- General Use:
- The price index for energy has risen sharply this quarter.
- Calculating a price index requires selecting a base year for comparison.
- With Specifiers:
- The Consumer Price Index (CPI) is the most common measure of the cost of living.
- The Producer Price Index (PPI) tracks changes in selling prices received by domestic producers.
- "to be indexed to": Used to describe a value (like a salary or bond) that is automatically adjusted based on changes in a specified price index.
- Her alimony payments are indexed to the Consumer Price Index.
- "Laspeyres price index": A specific formula for calculating a price index using a fixed basket of goods from a base period.
- "Paasche price index": A formula that uses a current basket of goods to calculate the index.
- Indexation (n): The process of linking adjustments (e.g., wages, taxes) to a price index.
- Deflator (n): A price index, such as the GDP deflator, used to convert nominal values into real values by removing the effect of price changes.
- Cost-of-living index: Another term for a consumer price index.
- Price indicator
- Price measure
- Inflation gauge
- Base period/Base year: The reference time point against which prices in other periods are compared in a price index.
- Market basket: The fixed set of goods and services whose prices are tracked to calculate the index.
- Weighting: The assignment of importance to different items in the basket based on their share of typical expenditure.
A "price index" is a core tool in macroeconomics. It does not express absolute prices but rather the percentage change in price from a starting point (the base period, which is typically set to an index value of 100). A rise in the index indicates inflation, while a fall indicates deflation.
- an index that traces the relative changes in the price of an individual good (or a market basket of goods) over time