Consumer Price Index and Inflation: Understanding the Factors and Statistics in the UK

Consumer Price Index/
Inflation

Introduction
• Consumer price index is referred as
the measurement of changing of the
price level of consumer goods,
whereas inflation is the rising price
level of the economy over a given
period of time. More specifically, CPI
is the most popular measurement of
inflation.
• According to Ivanic, Martin and
Zaman (2011), it is the weighted
average of the consumer goods and
services.
• It is an widely used economic
indicator, with which the inflation of
an economy can be measured.
• Inflation occurs due to the changes of
demand side and supply side factors.

Supply side factors: Raw
materials
• Price level trend of the raw
materials: With the rise of
the price of the raw
materials, the price level of
the final goods would be
increased.
• Supply of goods: The rise
in the price level of the raw
materials would lead to
reduce the supply of the
goods.