How to Calculate CPI
Find a record of past prices., Add together the prices of the items purchased previously., Find a record of current prices., Add together the current prices., Divide current prices by the old prices., Multiply the result by 100., Subtract 100 from...
Step-by-Step Guide
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Step 1: Find a record of past prices.
Grocery receipts from the past year would work well for this purpose.
For accurate calculations, use a sampling of prices based on a relatively brief period of time--perhaps just one or two months of the previous year.If you are using old receipts, make sure that they have the date on them.
Simply knowing that the prices listed are not current does not illustrate any real point.
The change in CPI is only relevant if calculated for a specifically quantifiable amount of time. -
Step 2: Add together the prices of the items purchased previously.
Using the record of past prices, add together a sampling of those product prices.
Normally, the CPI is restricted to some of the most commonly used consumer items--foods such as milk and eggs, and others such as laundry detergent and shampoo.
If you are using a record of your own purchases and are trying to determine the general trend in prices and not merely the change of a single item, you may want to exclude those items that are only occasional purchases. , Again, receipts would function well for this purpose.
If you are using a relatively small sample of items, you may be able to find the prices in flyers sent out by retail stores.
It may be useful, for the sake of comparison, to make sure the prices used are based upon the same brands and from the same retailer.
Because of the price differences at each store and from brand to brand, the only way to track the change of prices over time is to minimize these variables. , You must use an identical list of items as you used when you added the prices of past items together.
For example, if one loaf of bread was in your first list, one loaf of bread must be part of the list of current prices. , For example, if the total of current prices amounted to $90 and the old prices equaled $80, the result is
1.125 (represented mathematically, 90÷80=1.125). , The baseline for the CPI is 100--that is, the initial reference point, when compared to itself, equals 100%-- and so make your figure comparable.
Think of the CPI as a percentage.
Past prices represent a baseline, and that baseline is described as 100% of itself.
Using the previous example, current prices would be
112.5% of the previous prices. , By doing this, you are subtracting the baseline--represented by the number 100--to determine the change over time.
Again, using the above example, the result would be
12.5, representing a
12.5% change in prices from the first period to the second.
Positive results represent the rate of inflation; negative numbers reflect deflation (a rare fairly rare phenomenon in most of the world since the mid-twentieth century). -
Step 3: Find a record of current prices.
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Step 4: Add together the current prices.
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Step 5: Divide current prices by the old prices.
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Step 6: Multiply the result by 100.
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Step 7: Subtract 100 from the new result to find the change in CPI.
Detailed Guide
Grocery receipts from the past year would work well for this purpose.
For accurate calculations, use a sampling of prices based on a relatively brief period of time--perhaps just one or two months of the previous year.If you are using old receipts, make sure that they have the date on them.
Simply knowing that the prices listed are not current does not illustrate any real point.
The change in CPI is only relevant if calculated for a specifically quantifiable amount of time.
Using the record of past prices, add together a sampling of those product prices.
Normally, the CPI is restricted to some of the most commonly used consumer items--foods such as milk and eggs, and others such as laundry detergent and shampoo.
If you are using a record of your own purchases and are trying to determine the general trend in prices and not merely the change of a single item, you may want to exclude those items that are only occasional purchases. , Again, receipts would function well for this purpose.
If you are using a relatively small sample of items, you may be able to find the prices in flyers sent out by retail stores.
It may be useful, for the sake of comparison, to make sure the prices used are based upon the same brands and from the same retailer.
Because of the price differences at each store and from brand to brand, the only way to track the change of prices over time is to minimize these variables. , You must use an identical list of items as you used when you added the prices of past items together.
For example, if one loaf of bread was in your first list, one loaf of bread must be part of the list of current prices. , For example, if the total of current prices amounted to $90 and the old prices equaled $80, the result is
1.125 (represented mathematically, 90÷80=1.125). , The baseline for the CPI is 100--that is, the initial reference point, when compared to itself, equals 100%-- and so make your figure comparable.
Think of the CPI as a percentage.
Past prices represent a baseline, and that baseline is described as 100% of itself.
Using the previous example, current prices would be
112.5% of the previous prices. , By doing this, you are subtracting the baseline--represented by the number 100--to determine the change over time.
Again, using the above example, the result would be
12.5, representing a
12.5% change in prices from the first period to the second.
Positive results represent the rate of inflation; negative numbers reflect deflation (a rare fairly rare phenomenon in most of the world since the mid-twentieth century).
About the Author
Karen Simmons
Professional writer focused on creating easy-to-follow home improvement tutorials.
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