What is the chain price index?
The Price Index of the Chain Price is a specific way of measuring price changes over time. It does not use a fixed reference point to express each number as a percentage. Instead, each period is expressed as a comparison with the previous period. Chain prices index for easier AT-A-GLANCE reference and also allows changes to the method used to calculate prices.
The standard price index is a way of measuring price changes over time. It could be the price of a specific item, a specific type of item, or an attempt to measure all items for sale in the country. In the latter case, it is the usual technique to select a "basket" of goods, which is a selection of items designed to represent all types of products available.
This standard price index uses the initial number as a basic period. In future periods, the relevant number is expressed as a percentage of the one used in the basic period. For example, if the price watched for the first three years increased from $ 200 (USD) to $ 250 to $ 320, the index would start to 100, then rose to 125 and then nand 160.
There are two main restrictions on this method. First, as soon as the system runs for a long time, it is harder to see how large the formation between two periods occurred. For example, most people would have to make calculations to develop if the growth of the index from 800 to 885 was more significant than one of 3300 to 3600.
The second problem is that the index can only work if price research has always been directly comparable to the basic period. This is not usually the case in practice. Economists and statistics tend to change the content in the "basket" of goods and services to reflect changing tastes. In 2011, for example, the United Kingdom statisticians stopped, including the cost of pork arm, but began to include the costs of online dating sites. This means a direct comparison with the basic year is no longer fair.
The solution is the price of the chain price. Within this system, the value of the price for each period is expressed as forCentto price value from the previous period. In example 200/250/320/320 USD, the first two -year index data would remain as 100 and 125, but the third year would now be based on the second year, which will change the index to 128. This makes it easier to see that the change from the second to third year is proportionally only above the change from the first to the second year. The chain name index comes from the fact that any comparison between consecutive periods can be tied together to form a consistent and comparable number of index numbers.