The Unique of Index Number

The index number is a statistical measurement that used to measure the change
in a variable or combined (average) change of a grouped of related variables with
respect to time, geographical location or other characteristics. The index number is an
economic data figure reflecting price or quantity compared with a standard or base
value. Index numbers are usually used to compare the business activity, the cost of
living and employment. The index number of the base year usually equally 100. In
subsequent year, percentage increase will increase the index number above 100 and
percentage decreased will decrease the index number below 100.

The Consumer Price Index (CPI) is a measurement of the average change in

prices over time in a fixed market basket of goods and services such as food, medical
care and transportation. Basic types of data are needed to construct the CPI there is
price data and weighting data. The price data are collected for a sample of goods and
services from a sample of sales outlets in a sample of locations for a sample of times.
The weighting data are estimates of the shares of the different types of expenditure in
the total expenditure that cover by the index. Consumer Price Index usually computed
monthly, quarterly or half year in certain countries. CPI is one of the important
statistics for an economy because it can show or gives idea of the cost of living and it
generally based on weighted average of the price of the commodities. CPI also used to
measure inflation. The percentage change in the index of a period of time gives the
amount of inflation on the specific period.

Consumer Price Index is also used as an indicator of real change of values. It

is widely used as an indicator of the change in the general level of consumer prices or
inflation rate. The purchasing power of money is also affected by changes in price.
CPI is used to turn a series into real terms or numbers. Thus, CPI is very useful for
people to monitor and evaluate change to financial situation. CPI is one of the
important economic indicators because its high predictive ability analysts make it
plays an important role in analysis the economy and investment.