Measuring Pure Price Change in a Constantly Changing World
Description: Measuring Pure Price Change in a Constantly Changing World
Measuring Pure Price Change in a Constantly Changing World
The Consumer Price Index (CPI) tracks price change experienced by Canadians by comparing the cost of a fixed basket of goods and services through time. Over time, products become outdated, technology advances and people’s tastes evolve. As new products become available, they may change in quality, with new features or enhanced services, or in quantity, with different sized packaging.
How does it work?
To ensure an accurate CPI, prices are measured for the same items over time – this principle is known as constant quality. Dollar values, assigned to the characteristics of a product or service, are added or removed from the price as the characteristics change over time, in a process known as quality adjustment. Once the collected prices are adjusted to maintain constant quality, the remaining price movement is reflected in the CPI as a pure price change.
If a cup of coffee from your favourite restaurant now comes in a smaller cup but you pay the same amount, the price has increased.
New higher thread count!
If your new sheets now have a higher thread count and the price has increased proportionally, the price index is unchanged.
If your internet provider upgrades your download speed at no additional charge, the price of your internet service has decreased.
Source: Statistics Canada, Consumer Price Index.
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