part d- Retail prices index

• how is RPI calculated?

  two surveys carried out
• what is the first survey called?

  Living costs and food survey- 6000 households
• what does the living cost and food survey measure?

  what people spend their money on e.g petrol, haircuts
• what does the survey show?

  what proportion of income is spent on these items
• what is the second survey and based on?

  based on prices- measures change in prices of 700 of the most used goods and services and referred to basket of goods
• how is inflation measured from the surveys?

  price change in 2nd survey multiplied by weightings from first- converted to an index number

  inflation percentage CHANGE to index n.o over time
• e.g of inflation?

  index n.o rises from 100 to 102

  inflation = 2%