Chapter 7 - Index Numbers

• Index numbers

  used to compare price changes over time

  index number = (price/base year price) x100
• RPI

  retail price index - shows rate of change of prices of everyday goods. Calculated monthly by comparing prices to the same month of the previous year
• CPI

  consumer price index - official measure of inflation used by the UK government. Similar to RPI but does not include mortgage payments. CPI is weighted to reflect importance of different items the average shopping basket. The weightings change each year to reflect consumer spending.
• GDP

  Gross domestic product - value of goods and services produced in a country in a given amount of time

  if the GDP falls in 2 (or more) successive quarters the economy is in recession
• Weighted index numbers

  takes into account proportions

  weighted index number = sum of (index number x weight)/sum of weights
• Chain base index numbers

  compares prices from each year with that of the previous year. the previous year is used as the base year.

  chain base index numbers = (price/last year's price) x 100
• Crude rate

  tells you how things change in every 1000 - usually births, deaths, marriages or unemployment

  crude rate = (number of births or deaths/total population) x 1000
• Standard population

  represent the whole population, hypothetical population of 1000 people used to represent the whole population.

  standard population = (number in age group/total population) x 1000
• Standardised rate

  allows you to compare the same age group in different populations - allows for more realistic comparisons

  Standardised rate = (crude rate/1000) x standard population