Compare and Contrast the Consumer Price Index (CPI) and Producer

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The Answer is The government uses two major price indexes to evaluate inflation: the consumer price index (CPI), and the producer price index (PPI).The CPI measures the change in weighted average price over time in a consumer "market basket" of goods and services that the average person buys each month. Statistics Canada creates the basket-which includes hundreds of items, such as housing, transportation, haircuts, wine, and pet care-using data from more than 30000 consumers. While the market basket is meant to represent the average consumer, keep in mind that the "average" includes a lot of variation, so the CPI may not reflect individual personal experience. If you don't have a pet, for example, changes in veterinary costs wouldn't affect you, although they would (slightly) impact the CPI.The PPI measures the change over time in weighted average wholesale prices, or the prices that businesses pay each other for goods and services. Changes in the PPI can sometimes predict changes in the CPI, because producers tend to pass on price increases (and sometimes also price decreases) to consumers within a month or two of the changes.

Compare and Contrast the Consumer Price Index (CPI) and Producer

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