What is inflation and how is it measured?

what is in the basket of goods

There are several different inflation measures in the UK but the most familiar one is the Retail Prices Index (RPI). The RPI is used as the measure of inflation that is linked with tax allowances, state benefits, pensions and many other payments. The other main one is the Consumer Prices Index (CPI), which is the one on which the Government bases its inflation target.

You can see detailed contents of the baskets for the RPI and for the CPI in an article published by the official statistics organisation National Statistics, entitled 'CPI and RPI: the 2007 basket of goods and services'. See Annex B at the end of the article for the RPI basket. The CPI basket is in Annex A. The article is at http://www.statistics.gov.uk/elmr/04_07/... or go to http://www.statistics.gov.uk/CCI/article... and click the download link. The article also explains how and why the various items in the CPI and RPI baskets are chosen and why some changes may be made each year.

You can also see less detailed lists in the monthly report 'Focus on consumer price indices' by National Statistics, which gives the monthly index figures and the percentage change figures. The page that links to all the monthly reports is at http://www.statistics.gov.uk/statbase/pr... See Table 1.3 for the RPI or see table 1.2 if you want the list for CPI.

If you need to see a summary of the other inflation measures, there is one at http://www.statistics.gov.uk/cci/nugget....

Hope this helps you.

Adiutrix, from Enquire, the UK public libraries national collaborative service http://www.peoplesnetwork.gov.uk/. Visit us there any time!

Inflation is a general rise in prices, governments usually take todays date and a date some time in the 80's or 90's and do some maths to find out how much cheaaper things were.
It's measured in percentages.

Inflation is the general level of prices in an economy or in a country. As time goes by prices generally increase, this is often evident in the way people remember how much they used to pay for this or that many years ago. Or you may remember that for the same job the wages were ridiculously low say 20 years ago.

Inflation is measured by using a "basket of goods". That is someone (usually working for the government statistics office) decides on a number of goods which an average house hold would need to purchase e.g. food stuffs, cloths, petrol, and so on. The basket of good remains always the same and over time they measure the market value of all the good. The rate of increase in prices of the basket of goods is taken as a good indication of the rate of increase in the general level of prices in the country. This is what we call inflation.

Hope this helps

Inflation is measured by how much more it costs to buy basic products and services compared with the average income. there is a ratio thing going on, and I don't pretend to understand it, but it is a complicated formula. Basically, it is calculated by looking at median income and figuring out how much it costs to feed the need...not strictly how much currency it takes to pay for something, but what percentage of one's income has to be spent fulfilling that need.

Inflation is a an increase in prices for goods and services and this is measured by an annual perc increase so when inflation increases the purchasing power of your dollar becomes less

Inflation is the term used to describe the cost increase (in percentage) of goods and services over a specified period of time.
What is in the "basket of goods and services" seems to be a big secret. The claim is that "the basket" contains all the goods and services used by the "average" household.
Either I don't live in the "average household", or there is no such thing as the "average household, because the "official" rate of inflation here has no relationship to the "real" costs in my house.

Inflation is the change in prices from a year ago. There are actually two standard measures of inflation formed from different "baskets" of goods. The basket is chosen to be an "average" set of purchases. The two measures are the CPI (Consumer Price Index) and the RPI (Retail Price Index). The main difference between the two is the consumer price index excludes housing costs/morgage repayments from the basket, since the rate of inflation is taken into consideration when the bank of england sets interest rates which in turn affects the morgage repayments hence the RPI the bank of england uses the CPI.

What is included in the baskets has to be adapted from time to time to continue reporting on an average consumption bundle (for example if we compared the average shopping bag today to that of 50 years ago we would be buying lots of different items) however since has to be average it needs to take into account a wide range of things people would buy, it needs to cover food and drink obviously but also includs things like transportation costs and heating/eneryg costs.

The bank of england website has really good explanations of inflation and how it is used.