My three year infl.beating index linked saving cert is about to end should I continue for a further term from O A P
Explain How The Retail Price Index (RPI) Is Calculated?
Due to all the economic problems inflation can cause, governments need to keep a close eye on what is happening to the general price level in the economy, in the UK, the government uses the RETAIL PRICE INDEX. Other economies uses the same method but call it by a different name.
Each month, the government measures the price changes of around 600 different items. These items include food, tobacco, fuel and light, household goods (furniture, carpets, bedding, fridges, vaccume cleaners etc) Together these 600 items are known as a BASKET OF GOODS AND SERVICES and are the typically average type of goods and services brought by a typical family. The government collect these prices changes from 120 000 retail outlets (shops) from across the country.
The information is then sorted out and is much the same way as the average rate of inflation , the government then arrives at the change in average prices. The information is presented in the form of a table or INDEX.
Index average price= total sum of index / total number of commidies
the goods can also be 'weighed'
weighted average index= total weighted index / total sum of weights
Each month, the government measures the price changes of around 600 different items. These items include food, tobacco, fuel and light, household goods (furniture, carpets, bedding, fridges, vaccume cleaners etc) Together these 600 items are known as a BASKET OF GOODS AND SERVICES and are the typically average type of goods and services brought by a typical family. The government collect these prices changes from 120 000 retail outlets (shops) from across the country.
The information is then sorted out and is much the same way as the average rate of inflation , the government then arrives at the change in average prices. The information is presented in the form of a table or INDEX.
Index average price= total sum of index / total number of commidies
the goods can also be 'weighed'
weighted average index= total weighted index / total sum of weights
Retail price index is the same as consumer price index so to calculate either of them you need to know the base year weighted average price.then you need to find out basket price of year 1 so you calculate the average weighted price of every product and then you add them up
After you found both you divide CPi of year 1 by year 2 then multiply by 100.!!
After you found both you divide CPi of year 1 by year 2 then multiply by 100.!!
You are right, the products in the basket change with the pass of time and changes in modern life, like mobile phones were added at some - not too distant -time, and computers before that etc.; such changes are published - so the alert citicen will learn about it. The determination of the RPI is a rather complex procedure and I can only congratulate xxcharouxx to describe it in this brevity - yet comprehensible.
Isn't the RPI usually calculated by getting the valuable products or services in human living and measuring the cost of it. Usually the data calculated is compared to see the trend of living stands... If I know correctly, it's likely to be limited, so that only certain products are compared and they change them as the time goes along..
