Definition of Price Index

The price index it's a index number, a measure statistics which is calculated on the prices of the products of consumption massive in a certain period. It is worth noting that the one that is used the most is Consumer price index, which specifically measures the evolution of the expense of a family kind.

The consumer price index, abbreviated through the acronym CPI, is an index that estimates the behavior of the prices of a series of products widely consumed by a company type family (married couple with two children), popularly known as the family basket, and which will be determined based on the survey of household expenses.
These products, as we have pointed out, are consumed on a regular basis and what the CPI will do is observe the variations in the prices of these products with respect to a sample made in advance. Meanwhile, this percentage may be positive, in the event that there has been an increase in the prices of the products, or, failing that, negative, in the event that there has not been, that is, if the drop in the values.

The motivation of the CPI, as we mentioned, is the measurement of the prices of the most representative goods and services of a household during a time and in a given region, meanwhile, The CPI will also help as: an indicator to know if there is inflation or not, to update debts, to review salaries at the behest of joint discussions between unions and the state.

It should be noted that all CPIs must observe the following conditions: representativity and reliability, questions that will be achieved from the work on a sample that covers the maximum amount of population possible; and let it be comparable both in time and space with other CPIs of other nations and of the same periods.

Meanwhile, it is important that we point out the disadvantages attributed to the CPI, namely: it does not consider new products that have been introduced until its new update; does not consider the economy submerged; Variations in the values ​​are appreciated if the surveys are not rigorous; and does not incorporate those changes inherent to the quality.