ECON 101 Chapter Notes - Chapter 2.3: Newsprint, Weighted Arithmetic Mean, Time Series
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ECON 101 Full Course Notes
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A measure of some variable, conventionally expressed relative to a base period, which is assigned the value of 100. Comparing two time series with different units of measurements and absolute values a. Steel and newsprint; more useful to compare relative rather than absolute changes. Cpi = (consumer price index) weighted average of representative basket of consumer goods (weighted average of the separate index prices) a. b. You could construct separate index numbers for the price of beef, the price of coffee, and the price of orange juice, but to get the cpi you must take the weighted average. The weight assigned to each price index reflects the relative importance of that good in the typical consumers basket of good"s and services. Use ratios to solve for the missing variable. Step i: base year; set year 1 as the base year. Step ii: ratio; 25 is to 30 as 100 is to x=120.
