NOMINAL & REAL PRICES,

AND CONSUMER PRICE INDEX

NOMINAL VERSUS REAL PRICES
• NOMINAL PRICE
 The nominal price of a good (sometimes
called its “current-dollar” price) is its
absolute price. For example, the nominal
price of a pound of butter was about $0.87
in 1970, $1.88 in 1980, about $1.99 in
1990, and about $3.48 in 2015. These are
the prices you would have seen in
supermarkets in those years.
• REAL PRICE
 Real price of a good (sometimes called its
“constant-dollar” price) is the price relative
to an aggregate measure of prices. In other
words, it is the price adjusted for inflation.
 Price of a good relative to an aggregate
measure of prices; price adjusted for
inflation.
CONSUMER PRICE INDEX (CPI)
CONSUMER PRICE INDEX

 Serves as a basis of the aggregate measure of prices.

 The CPI is calculated by the Philippine Statistics Authority by surveying retail prices.
 It records how the cost of a large market basket of goods purchased by a “typical”
consumer changes over time.
 Percentage changes in the CPI measure the rate of inflation in the economy.
 REFERENCES:

• Consumer Price Index @ Economics (slideshare.net). Retrieved from

https://www.slideshare.net/babaylan1111/consumer-price-index-economics.