Routledge Dictionary of Economics, Second Edition
The UK index of consumer prices, previously known as the cost of living index. By a monthly repricing of a bundle of goods and services representative of an average consumer’s expenditure, it shows how much the price level has increased. The prices of more than 600 goods and services on sale in 180 towns are collected; data from the FAMILY EXPENDITURE SURVEY are also used.
The weights used are 17.5 per cent for housing, 15.4 per cent for food and 4.2 per cent for local domestic taxation. Its emphasis on consumer prices makes it a crucial indicator of the welfare effects of inflation and is of central importance to wage negotiators. In the UK, there were changes of the base in 1974 and 1987. The inclusion of mortgage payments and local taxation is unusual by international standards.
See also: consumer price index; headline rate of inflation; Laspeyres index; Paasche index
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