Computing a price index

Any of the index-number formulas in the previous section can be used to make a price index that measures the change in price for a single collection of goods and services over two periods. In application, however, price indices are computed for a variety of different goods and services, and are computed over many periods, not just two. These two points have implications for how the index-number formulas in the previous section are used to calculate a price index in practice. This section of the course explores how the two-period index-number formulas in the previous section can be used to calculate a price index for several groups of goods and services over many time periods.

📖 PPI manual: Chapter 4, section D; Chapter 9, paragraphs 9.6–9.24 and sections B3, B4, C1–C7.2.

📖 CPI manual: Chapter 1, paragraphs 1.147–1.164; Chapter 4, paragraphs 4.16–4.33.