Basket Of Goods
The consumer price index (CPI), a common measure of inflation, measures the price change over time for a basket of goods and services. The basket is representative of consumer spending patterns, and the change in its price represents the rate of inflation faced by consumers as a whole.For example, if the basket's price has increased 5% in the course of the year, consumer inflation can be said to be running at a 5% annual rate. The definition and contents of the measured basket can vary widely by country.In the U.S., the Bureau of Labor Statistics (BLS) monthly collects the prices of some 94,000 items from a scientifically selected sample of goods and services to assemble its representative basket. The numbers are then adjusted to ensure price changes don't reflect improvements in product quality, and weighted in proportion with consumer spending patterns derived from a separate survey of about 36,000 consumers in a given year.
Definition: A basket of goods refers to a set of goods and services used to measure the Consumer Price Index (CPI). These goods and services represent the consumption patterns of a typical consumer, and their price changes are used to calculate the inflation rate.
Origin: The concept of a basket of goods originated in the early 20th century as economists and statisticians sought methods to measure inflation and changes in the cost of living. The U.S. Bureau of Labor Statistics (BLS) first introduced the CPI in 1919 and has since refined the composition and calculation methods of the basket of goods.
Categories and Characteristics: A basket of goods typically includes the following categories of goods and services:
- Food and beverages: such as bread, milk, meat, vegetables, etc.
- Housing: including rent, home maintenance, and repair costs.
- Apparel: such as clothing, shoes, etc.
- Transportation: including cars, fuel, public transportation costs.
- Medical care: such as pharmaceuticals, medical services.
- Recreation: such as movie tickets, sports activities costs.
- Education and communication: such as tuition fees, telephone bills.
Specific Cases:
- In the United States, the BLS collects price data from about 94,000 goods and services each month and adjusts them based on the consumption patterns of about 36,000 consumers. For example, if food prices rise by 3% in a given year while transportation costs fall by 1%, these changes will proportionally affect the CPI calculation.
- In China, the National Bureau of Statistics releases CPI data monthly, and the basket of goods includes eight major categories: food, tobacco and alcohol, clothing, housing, household goods and services, transportation and communication, education, culture and entertainment, and healthcare. Price changes in each category affect the overall CPI.
Common Questions:
- Why do CPIs differ between countries? Different countries have varying consumption patterns, economic structures, and compositions of their baskets of goods, leading to differences in CPI calculations.
- How does the basket of goods account for new products? Statistical agencies periodically update the composition of the basket of goods to reflect the emergence of new products and services in the market, ensuring the accuracy of the CPI.
