Consumer Price Index (CPI) Formula
Calculate the CPI to track changes in the cost of living.
The most widely used measure of price levels in an economy.
The Formula
CPI = (Cost of Basket in Current Year / Cost of Basket in Base Year) × 100
The Consumer Price Index tracks how the price of a fixed basket of goods changes over time. A CPI of 100 means prices are at the base year level. Above 100 means prices have risen.
Variables
| Symbol | Meaning |
|---|---|
| CPI | Consumer Price Index (unitless number) |
| Current Basket | Total cost of the standard basket of goods today |
| Base Basket | Total cost of the same basket in the base year |
Example 1
A basket cost $400 in the base year and $460 today
CPI = (460 / 400) × 100
CPI = 115 (prices have risen 15% since the base year)
Example 2
The CPI is 180. What does a $50 base-year item cost now?
Current price = Base price × (CPI / 100)
Current price = 50 × (180 / 100)
Current price = $90
When to Use It
Use the CPI formula when:
- Tracking changes in the cost of living over time
- Adjusting salaries or Social Security payments for inflation
- Comparing purchasing power between different years
- Setting monetary policy and interest rates