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Free «The Consumer Price Index» Essay Sample

The consumer price index measure the prices of a basket of goods, taking an average. It's a good indicator of the general cost of living in any one place. As this index goes up or down, so does peoples behaviour and actions. When we look at the economy and how it is doing, the consumer price index can give us a sense of things. When people have a lot of money to burn, prices are likely to go up and the index is likely to increase. When the economy is in recession and people have very little money, the index will be down: people will be buying less because they have less money and prices will consequently be lower because demand is lower.

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If tuition was to suddenly increase dramatically, it is very likely that a whole host of other products would drop in price as demand for them would shrink. The cost of university tuition is one of the largest expenditures that the average family makes. For single people it is also a high cost that is not easily absorbed. A twenty percent increase in tuition would mean that people would have less money in their pockets to spend on other products. The result would be that they would buy less and there would be less demand in the marketplace. Prices would therefore decrease on average.

It is impressive how much the CPI can change when just one item increases in price. It means that people can afford a lot less than they did before. It really makes a person think about how our economy is interconnected.

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