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74-663: Old Age Security (OAS) is a monthly payment available to qualifying citizens and permanent residents of Canada who are 65 years old and older. Authorized by Section 94A of the Constitution Act of 1867, the program is defined by the Old Age Security Act (R.S.C., 1985, c. O-9). Implementation is the responsibility of the Minister of Employment and Social Development (ESDC). Administration is performed by Service Canada through offices across Canada. Prior to 2013,

148-430: A convex space , not only a vector space. The arithmetic mean has several properties that make it interesting, especially as a measure of central tendency. These include: The arithmetic mean may be contrasted with the median . The median is defined such that no more than half the values are larger, and no more than half are smaller than it. If elements in the data increase arithmetically when placed in some order, then

222-408: A component of a consumer price index. Opportunity cost can be looked at in two ways, since there are two alternatives to continuing to live in an owner-occupied dwelling. One, supposing that it is one year's cost that is to be considered, is to sell it, earn interest on the owner's capital thus released, and buy it back a year later, making an allowance for its physical depreciation. This can be called

296-500: A constant standard of living . Approximations can only be computed retrospectively, whereas the index has to appear monthly and, preferably, quite soon. Nevertheless, in some countries, notably the United States and Sweden, the philosophy of the index is that it is inspired by and approximates the notion of a true cost of living (constant utility) index, whereas in most of Europe it is regarded more pragmatically. The coverage of

370-406: A consumer price index has been, and remains, a subject of heated controversy in many countries. Various approaches have been considered, each with their advantages and disadvantages. Leaving aside the quality of public services, the environment, crime, and so forth, and regarding the standard of living as a function of the level and composition of individuals' consumption, this standard depends upon

444-479: A data set X {\displaystyle X} is denoted as X ¯ {\displaystyle {\overline {X}}} ). The arithmetic mean can be similarly defined for vectors in multiple dimensions, not only scalar values; this is often referred to as a centroid . More generally, because the arithmetic mean is a convex combination (meaning its coefficients sum to 1 {\displaystyle 1} ), it can be defined on

518-467: A few countries use the debt profile method, but in doing so, most of them behave inconsistently. Consistency would require that the index also cover the interest on consumer credit instead of the whole price paid for the products bought on credit if it covers mortgage interest payments. Products bought on credit would then be treated in the same way as owner-occupied dwellings. Variants of the debt profile method are employed or have been proposed. One example

592-763: A higher, more aggregated level (e.g. clothing) and weighted averages of the latter provide yet more aggregated sub-indices (e.g. Clothing and Footwear). Some of the elementary aggregate indices and some of the sub-indices can be defined simply in terms of the types of goods and/or services they cover. In the case of such products as newspapers in some countries and postal services, which have nationally uniform prices. But where price movements do differ or might differ between regions or between outlet types, separate regional and/or outlet-type elementary aggregates are ideally required for each detailed category of goods and services, each with its own weight. An example might be an elementary aggregate for sliced bread sold in supermarkets in

666-399: A person needed to apply to Employment and Social Development Canada (ESDC) and meet the eligibility criteria to receive benefits. Since 2013, the enrolment process has become increasingly automatic as Service Canada are now permitted to use data from Income Tax files. For persons who are not enrolled automatically, a manual application process remains in place. Eligibility for Old Age Security

740-445: A reference period will stand at more than 100 if house prices or, in the case of a fixed-interest mortgage, interest rates rose between 2006 and 2007. The application of this principle in the owner-occupied dwellings component of a consumer price index is known as the "debt profile" method. It means that the current movement of the index will reflect past changes in dwelling prices and interest rates. Some people regard this as odd. Quite

814-416: A result of 180 ° . This is incorrect for two reasons: In general application, such an oversight will lead to the average value artificially moving towards the middle of the numerical range. A solution to this problem is to use the optimization formulation (that is, define the mean as the central point: the point about which one has the lowest dispersion) and redefine the difference as a modular distance (i.e.,

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888-411: A situation with n {\displaystyle n} numbers being averaged). If a numerical property, and any sample of data from it, can take on any value from a continuous range instead of, for example, just integers, then the probability of a number falling into some range of possible values can be described by integrating a continuous probability distribution across this range, even when

962-406: A three-year average in recognition of the fact that household survey estimates are of poor quality. In some cases, some of the data sources used may not be available annually, in which case some of the weights for lower-level aggregates within higher-level aggregates are based on older data than the higher level weights. Infrequent reweighing saves costs for the national statistical office but delays

1036-427: Is 3 + 5 2 = 4 {\displaystyle {\frac {3+5}{2}}=4} , or equivalently 3 ⋅ 1 2 + 5 ⋅ 1 2 = 4 {\displaystyle 3\cdot {\frac {1}{2}}+5\cdot {\frac {1}{2}}=4} . In contrast, a weighted mean in which the first number receives, for example, twice as much weight as the second (perhaps because it

1110-525: Is assumed to appear twice as often in the general population from which these numbers were sampled) would be calculated as 3 ⋅ 2 3 + 5 ⋅ 1 3 = 11 3 {\displaystyle 3\cdot {\frac {2}{3}}+5\cdot {\frac {1}{3}}={\frac {11}{3}}} . Here the weights, which necessarily sum to one, are 2 3 {\displaystyle {\frac {2}{3}}} and 1 3 {\displaystyle {\frac {1}{3}}} ,

1184-637: Is calculated and reported on a per region or country basis on a monthly and annual basis. International organizations like the Organisation for Economic Co-operation and Development (OECD) report statistical figures like the consumer price index for many of its member countries. In the US the CPI is usually reported by the Bureau of Labor Statistics . An English economist by the name of Joseph Lowe first proposed

1258-469: Is calculated by using a representative basket of goods and services. The basket is updated periodically to reflect changes in consumer spending habits. The prices of the goods and services in the basket are collected monthly from a sample of retail and service establishments. The prices are then adjusted for changes in quality or features. Changes in the CPI can be used to track inflation over time and to compare inflation rates between different countries. While

1332-452: Is eligible for a partial 85% OAS pension (34/40=0.85). The pension is paid monthly, on the third business day from the end of the current month. In December, the payment is made about one week earlier than other months. The Government prefers to use Direct Deposit, which has been observed to be consistently executed shortly after midnight Pacific time. This is an unpublished operational detail that ensures all Canadians receive these payments at

1406-416: Is involved, consider a consumer price index computed with reference to 2009 for just one sole consumer who bought her house in 2006, financing half of this sum by raising a mortgage. The problem is to compare how much interest such a consumer would now be paying with the interest that was paid in 2009. Since the aim is to compare like with like, that requires an estimate of how much interest would be paid now in

1480-404: Is straightforward for most Canadians. Persons who have lived outside of Canada can refer to official documentation for details including residency requirements and a list of reciprocal agreements with other countries which may allow pooling of residency periods to increase eligibility for Canadian or foreign pension rights. Low-income OAS recipients may apply for an additional amount in the form of

1554-405: Is that purchases of new dwellings are treated as "investment" in the system of national accounts and should not enter a consumption price index. It is said that this is more than just a matter of terminological uniformity. For example, it may be thought to help understand and facilitate economic analysis if what is included under the heading "consumption" is the same in the consumer price index and in

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1628-453: Is to be compared with the movement of the consumer price index, incomes must be expressed as money income plus this imaginary consumption value. That is logical, but it may not be what users of the index want. Although the argument has been expressed in connection with owner-occupied dwellings, the logic applies equally to all durable consumer goods and services. Furniture, carpets, and domestic appliances are not used up soon after purchase in

1702-463: Is to include down payments as well as interest. Another is to correct nominal mortgage rates for changes in dwelling prices or for changes in the rest of the consumer price index to obtain a "real" rate of interest. Also, other methods may be used alongside the debt profile method. Thus, several countries include a purely notional cost of depreciation as an additional index component, applying an arbitrarily estimated, or rather guessed, depreciation rate to

1776-433: Is unavailable, so indices are computed using an unweighted arithmetic or geometric mean of the prices of the sampled products. (However, the growing use of barcode scanner data is gradually making weighting information available even at the most detailed level.) These indices compare prices each month with prices in the price-reference month. The weights used to combine them into the higher-level aggregates and then into

1850-526: The w e i g h t i {\displaystyle \mathrm {weight} _{i}} terms do not necessarily sum to 1 or 100. By convention, weights are fractions or ratios summing to one, as percentages summing to 100 or as per mile numbers summing to 1000. On the European Union's Harmonized Index of Consumer Prices (HICP), for example, each country computes some 80 prescribed sub-indices, their weighted average constituting

1924-407: The distribution of income for which a few people's incomes are substantially higher than most people's, the arithmetic mean may not coincide with one's notion of "middle". In that case, robust statistics, such as the median , may provide a better description of central tendency. The arithmetic mean of a set of observed data is equal to the sum of the numerical values of each observation, divided by

1998-483: The "alternative cost" approach. The other, the "rental equivalent" approach, is to let it to someone else for the year, in which case the cost is the rent that could be obtained for it. There are practical problems in implementing either of these economists' approaches. Thus, with the alternative cost approach, if house prices are rising fast, the cost can be negative and then become sharply positive once house prices start to fall, so such an index would be very volatile. On

2072-406: The 1980s, the median income in the United States has increased more slowly than the arithmetic average of income. A weighted average, or weighted mean, is an average in which some data points count more heavily than others in that they are given more weight in the calculation. For example, the arithmetic mean of 3 {\displaystyle 3} and 5 {\displaystyle 5}

2146-1276: The CPI can be performed as CPI = updated cost base period cost × 100 {\displaystyle {\text{CPI}}={\frac {\text{updated cost}}{\text{base period cost}}}\times 100} . The "updated cost" (i.e. the price of an item at a given year, e.g.: the price of bread today) is divided by that of the initial year (the price of bread in 1970), then multiplied by one hundred. Many but not all price indices are weighted averages using weights that sum to 1 or 100. Example: The prices of 85,000 items from 22,000 stores, and 35,000 rental units are added together and averaged. They are weighted this way: housing 41.4%; food and beverages 17.4%; transport 17.0%; medical care 6.9%; apparel 6.0%; entertainment 4.4%; other 6.9%. Taxes (43%) are not included in CPI computation. C P I = ∑ i = 1 n C P I i × w e i g h t i ∑ i = 1 n w e i g h t i {\displaystyle \mathrm {CPI} ={\frac {\sum _{i=1}^{n}\mathrm {CPI} _{i}\times \mathrm {weight} _{i}}{\sum _{i=1}^{n}\mathrm {weight} _{i}}}} where

2220-417: The CPI is not a perfect measure of inflation or the cost of living , it is a useful tool for tracking these economic indicators. A CPI is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically. Sub-indices and sub-sub-indices can be computed for different categories and sub-categories of goods and services, which are combined to produce

2294-567: The CPI is one of the most closely watched national economic statistics. The index is usually computed monthly, or quarterly in some countries, as a weighted average of sub-indices for different components of consumer expenditure, such as food, housing, shoes, and clothing, each of which is, in turn, a weighted average of sub-sub-indices. At the most detailed level, the elementary aggregate level (for example, men's shirts sold in department stores in San Francisco), detailed weighting information

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2368-581: The Guaranteed Income Supplement (GIS). A domestic partner's income affects the income threshold and payout. To receive the full OAS pension, a person must have lived in Canada for at least 40 years after turning 18. If less than 40 years after age 18, the amount of partial OAS pension received is prorated, based on the number of years they have lived in Canada divided by 40. For example, a person living in Canada for 34 years after age 18

2442-471: The Northern region. Most elementary aggregate indices are necessarily 'unweighted' averages for the sample of products within the sampled outlets. However, in cases where it is possible to select the sample of outlets from which prices are collected so as to reflect the shares of sales to consumers of the different outlet types covered, self-weighted elementary aggregate indices may be computed. Similarly, if

2516-434: The amount and range of goods and services they consume. These include the service provided by rented accommodation, which can readily be priced, and the similar services yielded by a flat or house owned by the consumer who occupies it. Its cost to a consumer is, according to the economic way of thinking, an " opportunity cost ," namely what he or she sacrifices by living in it. This cost, according to many economists, should form

2590-452: The arithmetic mean is frequently used in economics , anthropology , history , and almost every academic field to some extent. For example, per capita income is the arithmetic average income of a nation's population. While the arithmetic mean is often used to report central tendencies , it is not a robust statistic : it is greatly influenced by outliers (values much larger or smaller than most others). For skewed distributions , such as

2664-475: The arithmetic mean is: If the data set is a statistical population (i.e., consists of every possible observation and not just a subset of them), then the mean of that population is called the population mean and denoted by the Greek letter μ {\displaystyle \mu } . If the data set is a statistical sample (a subset of the population), it is called the sample mean (which for

2738-432: The base year, often differs both from the weight-reference period and the price-reference period. This is just a matter of rescaling the whole time series to make the value for the index reference period equal to 100. Annually revised weights are a desirable but expensive feature of an index; the older the weights, the greater the divergence between the current expenditure pattern and that of the weight reference period. It

2812-442: The classifications they use rarely correspond to COICOP categories. The increasingly widespread use of bar codes, scanners in shops has meant that detailed cash register printed receipts are provided by shops for an increasing share of retail purchases. This development makes possible improved Household Expenditure surveys, as Statistics Iceland has demonstrated. Survey respondents keeping a diary of their purchases need to record only

2886-658: The consumer basket, different price indices may be calculated for groups with various demographic characteristics. For example, consumer price indices calculated according to the weightings in the consumer basket of income groups may show significantly different trends. No firm rules can be suggested on this issue for the simple reason that the available statistical sources differ between countries. However, all countries conduct periodical household-expenditure surveys and all produce breakdowns of consumption expenditure in their national accounts . The expenditure classifications used there may however be different. In particular: Even with

2960-439: The context is clear) is the sum of a collection of numbers divided by the count of numbers in the collection. The collection is often a set of results from an experiment , an observational study , or a survey . The term "arithmetic mean" is preferred in some mathematics and statistics contexts because it helps distinguish it from other types of means, such as geometric and harmonic . In addition to mathematics and statistics,

3034-526: The data Amount of total numbers within the data {\displaystyle {\frac {\text{Total of all numbers within the data}}{\text{Amount of total numbers within the data}}}} For example, if the monthly salaries of 10 {\displaystyle 10} employees are { 2500 , 2700 , 2400 , 2300 , 2550 , 2650 , 2750 , 2450 , 2600 , 2400 } {\displaystyle \{2500,2700,2400,2300,2550,2650,2750,2450,2600,2400\}} , then

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3108-404: The different approaches are multidimensional, including feasibility, views on the way the index should and would move in particular circumstances, and theoretical properties of the index. Arithmetic mean In mathematics and statistics , the arithmetic mean ( / ˌ æ r ɪ θ ˈ m ɛ t ɪ k / arr-ith- MET -ik ), arithmetic average , or just the mean or average (when

3182-453: The distance on the circle: so the modular distance between 1° and 359° is 2°, not 358°). The arithmetic mean is often denoted by a bar ( vinculum or macron ), as in x ¯ {\displaystyle {\bar {x}}} . Some software ( text processors , web browsers ) may not display the "x̄" symbol correctly. For example, the HTML symbol "x̄" combines two codes —

3256-421: The estimation of weights: use all the available information and accept that rough estimates are better than no estimates. Ideally, in computing an index, the weights would represent current annual expenditure patterns. In practice, they necessarily reflect past using the most recent data available or, if they are not of high quality, some average of the data for more than one previous year. Some countries have used

3330-410: The former being twice the latter. The arithmetic mean (sometimes called the "unweighted average" or "equally weighted average") can be interpreted as a special case of a weighted average in which all weights are equal to the same number ( 1 2 {\displaystyle {\frac {1}{2}}} in the above example and 1 n {\displaystyle {\frac {1}{n}}} in

3404-498: The index may be limited. Consumers' expenditure abroad is usually excluded; visitors' expenditure within the country may be excluded in principle if not in practice; the rural population may or may not be included; certain groups, such as the very rich or the very poor, may be excluded. Savings and investment are always excluded, though the prices paid for financial services provided by financial intermediaries may be included along with insurance. The index reference period, usually called

3478-402: The index. An 'elementary aggregate' is a lowest-level component of expenditure: this has a weight, but the weights of each of its sub-components are usually lacking. Thus, for example: Weighted averages of elementary aggregate indices (e.g. for men's shirts, raincoats, women's dresses, etc.) make up low-level indices (e.g. outer garments). Weight averages of these, in turn, provide sub-indices at

3552-432: The individual price observations can all be weighted. This may be the case, for example, where all selling is in the hands of a single national organization which makes its data available to the index compilers. For most lower level indices, however, the weight will consist of the sum of the weights of a number of elementary aggregate indices, each weight corresponding to its fraction of the total annual expenditure covered by

3626-413: The introduction into the index of new types of expenditure. For example, subscriptions for Internet service entered index compilation with a considerable time lag in some countries, and account could be taken of digital camera prices between re-weightings only by including some digital cameras in the same elementary aggregate as film cameras. The way in which owner-occupied dwellings should be dealt with in

3700-401: The market shares of the different types of products represented by product types are known, even only approximately, the number of observed products to be priced for each of them can be made proportional to those shares. The outlet and regional dimensions noted above mean that the estimation of weights involves a lot more than just the breakdown of expenditure by types of goods and services, and

3774-466: The median and arithmetic average are equal. For example, consider the data sample { 1 , 2 , 3 , 4 } {\displaystyle \{1,2,3,4\}} . The mean is 2.5 {\displaystyle 2.5} , as is the median. However, when we consider a sample that cannot be arranged to increase arithmetically, such as { 1 , 2 , 4 , 8 , 16 } {\displaystyle \{1,2,4,8,16\}} ,

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3848-407: The median and arithmetic average can differ significantly. In this case, the arithmetic average is 6.2 {\displaystyle 6.2} , while the median is 4 {\displaystyle 4} . The average value can vary considerably from most values in the sample and can be larger or smaller than most. There are applications of this phenomenon in many fields. For example, since

3922-402: The naive probability for a sample number taking one certain value from infinitely many is zero. In this context, the analog of a weighted average, in which there are infinitely many possibilities for the precise value of the variable in each range, is called the mean of the probability distribution . The most widely encountered probability distribution is called the normal distribution ; it has

3996-551: The national HICP. The weights for these sub-indices will consist of the sum of the weights of a number of component lower level indices. The classification is according to use, developed in a national accounting context. This is not necessarily the kind of classification that is most appropriate for a consumer price index. Grouping together of substitutes or of products whose prices tend to move in parallel might be more suitable. For some of these lower-level indices detailed reweighing to make them be available, allowing computations where

4070-399: The national income and expenditure accounts. Since these accounts include the equivalent rental value of owner-occupied dwellings, the equivalent rental approach would have to be applied to the consumer price index too. But the national accounts do not apply it to other durables, so the argument demands consistency in one respect but accepts its rejection in another. The other argument is that

4144-570: The necessary adjustments, the national-account estimates and household-expenditure surveys usually diverge. The statistical sources required for regional and outlet-type breakdowns are usually weak. Only a large-sample Household Expenditure survey can provide a regional breakdown. Regional population data are sometimes used for this purpose, but need adjustment to allow for regional differences in living standards and consumption patterns. Statistics of retail sales and market research reports can provide information for estimating outlet-type breakdowns, but

4218-624: The number of separately weighted indices composing the overall index depends upon two factors: How the weights are calculated, and in how much detail, depends upon the availability of information and upon the scope of the index. In the UK the retail price index (RPI) does not relate to the whole of consumption, for the reference population is all private households with the exception of pensioner households that derive at least three-quarters of their total income from state pensions and benefits, and "high income households" whose total household income lies within

4292-402: The opportunity cost of the use of durables is impracticable. Another approach is to concentrate on spending. Everyone agrees that repairs and maintenance expenditures for owner-occupied dwellings should be covered by a consumer price index, but the spending approach would include mortgage interest too. This turns out to be quite complicated, both conceptually and in practice. To explain what

4366-420: The other hand, with the rental equivalent approach, there may be difficulty estimating the movement of rental values for types of property that are not actually rented. If one or other of these measures of the consumption of the services of owner-occupied dwellings is included in consumption, then it must be included in income too, for income equals consumption plus saving. This means that if the movement of incomes

4440-436: The overall index relate to the estimated expenditures during the preceding whole year of the consumers covered by the index on the products within its scope in the area covered. Thus, the index is a fixed-weight index but rarely a true Laspeyres index since the weight-reference period of a year and the price-reference period, usually a more recent single month, do not coincide. Ideally, all price revalidations are accepted, and

4514-511: The overall index with weights reflecting their shares in the total of the consumer expenditures covered by the index. It is one of several price indices calculated by most national statistical agencies. The annual percentage change in the CPI is used as a measure of inflation . A CPI can be used to index (i.e., adjust for the effect of inflation) the real value of wages , salaries , and pensions ; to regulate prices; and to deflate monetary magnitudes to show changes in real values. In most countries,

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4588-592: The pension recovery tax when the Canada Revenue Agency determines that the recipient's taxable income is greater than 80% of Canadians. The GIS is not taxed. The amount must still be reported in an income tax filing where it becomes a tax deductible. Consumer Price Index A consumer price index ( CPI ) is a price index , the price of a weighted average market basket of consumer goods and services purchased by households. Changes in measured CPI track changes in prices over time. The CPI

4662-457: The prices of new dwellings should exclude that part reflecting the value of the land, since this is an irreproducible and permanent asset that cannot be said to be consumed. This would presumably mean deducting site value from the price of a dwelling, with site value being defined as the price the site would fetch at auction if the dwelling were not on it. How this is to be understood in the case of multiple dwellings remains unclear. The merits of

4736-413: The principle thus requires that the index for our one house owner reflect the movement of the prices of houses like hers from 2006 to 2007 and the change in interest rates. If she took out a fixed-interest mortgage, it is the change in interest rates from 2006 to 2007 that counts; if she took out a variable-interest mortgage, it is the change from 2009 to 2010 that counts. Thus, her current index with 1999 as

4810-407: The property that all measures of its central tendency, including not just the mean but also the median mentioned above and the mode (the three Ms ), are equal. This equality does not hold for other probability distributions, as illustrated for the log-normal distribution here. Particular care is needed when using cyclic data, such as phases or angles . Taking the arithmetic mean of 1° and 359° yields

4884-478: The same time, regardless of their time zone of residence. There is an official Government of Canada schedule that does not specify the time of day. The OAS and GIS payment amounts are affected by the age and marital status of the recipient. Amounts are reviewed at the beginning of each calendar quarter, compared to the Consumer Price Index and increased as appropriate. The OAS payout is subject to

4958-911: The theory of price basket index in 1822. His fixed basket approach was relatively simple as Lowe computed the price of a list of goods in period 0 and compared the price of that same basket of goods in period 1. Since his proposed theories however were elementary, later economists built on his ideas to form our modern definition. consumer price index = market basket of desired year market basket of base year × 100 {\displaystyle {\text{consumer price index}}={\frac {\text{market basket of desired year}}{\text{market basket of base year}}}\times {\text{100}}} or CPI 2 CPI 1 = price 2 price 1 {\displaystyle {\frac {{\text{CPI}}_{2}}{{\text{CPI}}_{1}}}={\frac {{\text{price}}_{2}}{{\text{price}}_{1}}}} Alternatively,

5032-436: The top four per cent of all households. The result is that it is difficult to use data sources relating to total consumption by all population groups. For products whose price movements can differ between regions and between different types of outlet: The situation in most countries comes somewhere between these two extremes. The point is to make the best use of whatever data are available. Due to differences in weightings in

5106-424: The total number of observations. Symbolically, for a data set consisting of the values x 1 , … , x n {\displaystyle x_{1},\dots ,x_{n}} , the arithmetic mean is defined by the formula: (For an explanation of the summation operator, see summation .) In simpler terms, the formula for the arithmetic mean is: Total of all numbers within

5180-460: The total of purchases when itemized receipts were given to them and keep these receipts in a special pocket in the diary. These receipts provide not only a detailed breakdown of purchases but also the name of the outlet. Thus response burden is markedly reduced, accuracy is increased, product description is more specific and point of purchase data are obtained, facilitating the estimation of outlet-type weights. There are only two general principles for

5254-572: The value of the stock of owner-occupied dwellings. Finally, one country includes both mortgage interest and purchase prices in its index. The third approach simply treats the acquisition of owner-occupied dwellings in the same way as acquisitions of other durable products are treated. This means: Furthermore, expenditure on enlarging or reconstructing an owner-occupied dwelling would be covered, in addition to regular maintenance and repair. Two arguments of almost theological character are advanced in connection with this transactional approach. One argument

5328-519: The way that food is. Like dwellings, they yield a consumption service that can continue for years. Furthermore, since strict logic is to be adhered to, there are durable services as well that ought to be treated in the same way; the services consumers derive from appendectomies or crowned teeth continue for a long time. Since estimating values for these components of consumption has not been tackled, economic theorists are torn between their desire for intellectual consistency and their recognition that including

5402-462: The weights would relate to the composition of expenditure during the time between the price-reference month and the current month. There is a large technical economics literature on index formulas that would approximate this and that can be shown to approximate what economic theorists call a true cost-of-living index . Such an index would show how consumer expenditure would have to move to compensate for price changes so as to allow consumers to maintain

5476-422: The year 2010 on a similar house bought and 50% mortgage-financed three years ago, in 2007. It does not require an estimate of how much that identical person is paying now on the actual house she bought in 2006, even though that is what personally concerns her now. A consumer price index compares how much it would cost now to do exactly what consumers did in the reference period with what it cost then. Application of

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