What is Consumer Price Index (CPI)?

Have you ever wondered why the price of your favorite snacks or toys keep changing? Why is it that sometimes you can buy more with the same amount of money, while at other times you can buy less? That’s where the Consumer Price Index (CPI) comes in!

What is the Consumer Price Index?

The Consumer Price Index, or CPI for short, is a measure of the average change in prices of goods and services that people buy for everyday living. It tells us how much more or less expensive things are compared to a base period, which is usually set at 100. For example, if the CPI is 120, it means that prices have increased by 20% since the base period.

How is CPI calculated?

CPI is calculated by gathering data on the prices of thousands of goods and services across the country. This includes things like food, clothing, housing, transportation, and entertainment. The prices are then averaged out to get an overall CPI figure. The Bureau of Labor Statistics (BLS), a government agency, is responsible for collecting and publishing CPI data.

Why is CPI important?

CPI is important because it helps us understand how the economy is doing. If the CPI is going up, it means that prices are rising and inflation may be happening. If the CPI is going down, it means that prices are falling and deflation may be happening. The government, businesses, and investors all use CPI data to make decisions about things like interest rates, wages, and investments.


Consumer Price Index may sound like a big, complicated term, but it’s actually a very important concept that affects all of us. It helps us understand how much things cost and how the economy is doing. So, the next time you notice that the price of your favorite snack has gone up, you can impress your friends by telling them all about CPI!

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