In order to assess changes to the cost of living from year to year, a consumer price index (CPI) measures changes in the price level of market basket of consumer goods and services purchased by households.
This collection of products includes the cost of food, energy, medical care and transportation.
The annual percentage change in a CPI is used as a measure of inflation.
A CPI can be used to index (i.e. adjust for the effect of inflation) the real value of wages, salaries, pensions, for regulating prices and to show changes in real values.« Back to Glossary Index