Price Indexes

A price index is a tool used to measure how the prices of a selected group of goods and services change over time. It helps compare the current cost of these items to their cost in a base year, indicating inflation or deflation. For example, if the index increases, it means prices have generally risen; if it decreases, prices have fallen. Price indexes are essential for adjusting wages, pensions, and contracts, ensuring they reflect changes in the cost of living. They provide a standardized way to track economic trends and understand how prices evolve across time periods.