# Advice 1: How to calculate the price index

In a market economy among the indices of quality indicators, an important place belongs to the consumer price index. It allows to assess the dynamics and recalculate the main indicators of system of national accounts: gross domestic product, national income etc.
Instruction
1
Before proceeding to the calculation of a price index, you must understand the principle of its construction. If you need to identify the extent to which the price of certain goods or services or a quantity of goods or services, it is necessary to bring certain quantity of goods at a specified price to the total cost. For this you need to measure the weight of each item (prices or quantities). If you need to reflect the change in the price of goods, the weights need to take a number of goods. If you need to find the change in the number of goods, the weights will be the price. It is only necessary to decide on the level of some period (baseline or reporting) to fix them.
2
To find the price index, you can use the Laspeyres formula. It is the number of items q is fixed at the base period:

Ip = ΣP1хQ0/ΣP0хQ0 where ΣP1хQ0 cost of products sold in the previous period (base) prices of the reporting period; ΣP0хQ0 – the cost of production in the base period.

This index shows price changes in the reporting period compared with baseline on products made in the base period. In other words, the Laspeyres price index shows the cost of goods in the base period has increased or decreased due to price changes during the reporting period.
3
Price index you can also calculate the Paasche formula. In it, the volume of traded goods is set at the reporting period:

Ip = ΣP1хQ1/ΣP0хQ1 where ΣP1хQ1 – the cost of production in the reporting period; ΣP0хQ1 – cost of goods sold in the reporting period at prices of the previous one.

This index characterizes the change of prices for the reporting period compared with baseline on goods sold in the reporting period. In other words, it shows how much did the cost of goods sold. The Paasche price index is actively used in the national statistics until the country's transition to a market economy. After 1991, the calculation of price indices began to produce according to Laspeyres.

# Advice 2: How to calculate consumer price index

The index of consumer prices – one of the ways to measure the average level of prices, which is calculated for a variety of goods and services and, according to some researchers, is the best indicator of cost of living.
Instruction
1
The index of consumer prices, calculates the change of prices of goods and services included in the consumer basket. In Russia, the consumer basket was approved on 31 March 2006 Federal law No. 44-FZ "On consumer basket in the Russian Federation". It includes three groups of products and services:
• Food (grain products, potatoes, vegetables, etc.)
• Non-food goods (clothes, medicines, household goods, etc.);
• Facilities (utilities, transportation, etc.).
2
To calculate the index of consumer prices alone, you need a full list of the included in the basket of goods and services, their pricesand the base year and the current market value. Formula index of consumer prices as follows: CPI = ? (C(t) ? T(b)) / ? (C(b) ? T(b)),where C(t) and p(b) – the level of prices, respectively, of the current and base years for the products and services of the consumer basket;
T(b) – list of goods and services in the consumer basket. To calculate inflation, the fraction is multiplied by 100 about thepricestov.
3
Similarly, we can calculate the index of consumer prices and inflation based on its own consumption basket. To do this make a complete range of products and services that are necessary for you and you always use. Write down their current pricess. For personal use you can calculate the index of consumer prices on a monthly basis. Some people described method to calculate the so-called real inflation, which typically does not coincide with the rate of inflation, officially approved. However, nothing surprising in this. It has long been observed that inflation is always higher in the group of inexpensive items which is the majority of the population.
Note
The price index shows how many times the increased (decreased) the cost of production due to price changes or how many percent growth (decrease) of the cost of production as a result of changes in prices. The formula for determining the price index has the form of One of the most important indicators of price statistics, widely used in economic and social policy, is the consumer price index (CPI) .