Measuring the

Adapted from the work of Coconuts Manila (2012)

Consumer Price Index (CPI)
“a measure of the overall cost of the goods and services bought by a
typical consumer”(Mankiw, 2012,p.218)
“an indicator of the change in the average retail prices of a fixed basket
of goods and services commonly purchased by households relative to a
base year.”(Consumer Price Index Primer of PSA)
Consumer Price Index (CPI)

Adapted from “What Do You Know About the BSP?”Published by the Banko Sentral ng Pilipinas,p.4
Composition of the Basket of Goods

Adapted from the Consumer Price Index Primer of PSA

Notes on CPI Computation

Primer on Consumer Price Index.pdf

Adapted from “What Do You Know About the BSP?”Published by the Banko Sentral ng
Pilipinas,p.5
CPI as a Measure of the Cost of Living
According to Mankiw (2012) CPI is used to measure the cost of living
of people.
Through this measure, it will serve as signals how much increase in
income is needed to maintain a constant standard of living.
On the other hand Case et.al.(2012,p.137-138) quipped that the “bad
side of inflation according to some people is that inflation lowers the
standard of living because goods and services become expensive and it cuts
their purchasing power”.
The severity of impact of inflation will depend on how fast /slow the
increase of income of people relative to the increase in inflation. Fixed
income earners are at loss in this situation because their ability to purchase
falls proportionately as price of goods increases.
References
Case, K., Fair,R.& Oster,S. (2012). Principles of Macroeconomics 10th
Ed.Boston,MA: Pearson Education.
Coconuts Manila (2012). Cost of Living [ Drawing]. Retrieved from
https://coconuts.co/manila/news/uncategorized-manila-cost-of-living-cheaper-than-bangkok/
Consumer Price Index (CPI).(n.d). Retrieved from
https://psa.gov.ph/sites/default/files/Primer%20on%20Consumer%20Price%20Index2_1_0.pdf
Mankiw,G. (2012). Principles of Macroeconomics 6th Ed. Mason,OH:
South-Western Cengage Learning.
What Do You Know About the BSP?.(n.d). Retrieved from
http://www.bsp.gov.ph/downloads/PPT/PPT_Role%20of%20BSP.pdf