Index Numbers

index number:     way to compare measurements made at different times or places
                          choose one measurement as refernce value
                        index number = ( measured value / reference value) * 100

gas in 1975: 57.7 c per gallon, gas today (2002): 148.9c per gallon, use the 1975 value as reference number to compute a gas index.

Consumer Price Index (CPI) : is based on average prices in a sample of 60,000 goods, services and housing costs (computed monthly)

inflation rate between years X and Y = (CPI_Y - CPI_X) / CPI_X

compute the rate of inflation from 1980 to 1990 and from 1990 to 2000

Consumer Price Index
1980	82.4
1990	130.7
2000	172.2

Adjusting prices for inflation: price in $_Y = (price in $_X) * (CPI_Y / CPI_X),
where X and Y represent years.

need $20,000 to maintain a particular standard of living in 1975. How much is need in 2000 for the same standard of living?

Consumer Price Index
1975	53.8
2000	172.2

how much was a $15 haircut (in todays $) in 1980?
compare the home prices (South) with the rate of inflation.

home prices
1990	85,900
2000	109,000

a health care index, which measures health care in the states:

Health Care Quality Index
WI	114.6
TN	87.1

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