Concept in Definition ABC

CPI is a initials which corresponds to the following denomination: Consumer's price indexAlthough, it should be noted that depending on the country in which it is located, it will be called this way or it may appear as: Consumer Price Index or Consumer Brand Price Index.

Index that values ​​monetarily the products that make up the basic family basket

So the CPI is a Index in which the prices of a series of basic products that people consume regularly and popularly known as the family basket will appear highlighted and valued.

It is determined from a measurement tool calledSurvey Continuum of Family Budgets and whose elaboration corresponds to the state body that deals precisely with national statistics.

The survey, through its questions, seeks to get as close as possible to the regular consumption habits that families present, for later, from the knowledge of the products, to be able to study how their prices evolve, that is, the price of one of them compared to a sample made with anteriority.

Finally, with that information, the CPI will be created.

Prices up (Inflation) or prices down (deflation)

Now, the percentage or variation that the products present may be positive, which indicates that there has been an increase in the price of the same, or in its negative defect, which on the contrary indicates a decrease in the value.

They are conditions without equanom, on the one hand, that the CPI is representative and confidence, that is, that an important population to meet these two requirements.

And on the other hand let it be feasible for comparison, that is, that it can be compared in space and time with other CPIs in the country or in other nations.

Among the most prominent and recurrent uses attributed to the CPI are the following: measuring inflation in a country, updating debts, indicator for salary revision.

In the last mentioned situation, the CPI, is essential, since if the prices of the products that a population consumes the most family type have increased, and accompanying this situation must be an increase in salary, otherwise, the employee loses the power to acquire them.

In an inflationary context, precisely the latter is what happens, the prices of the so-called basket rise considerably and then, at Consumers who continue to earn the same salary, it is difficult for them to be able to buy all of them as they could before, because of course they cost more and he continues to earn the same.

When these inflation scenarios occur in a country it will be essential, so that people do not suffer a drop in their purchasing power, to be able to accompany the increase in prices of basic goods with an increase in your salary, in this way, you can beat inflation and continue to purchase those products from the basic basketOtherwise, the consumer will be severely affected when it comes to being able to cover their purchase.

And what unfortunately ends up happening is that people stop buying those products, which in their most correspond to food, a situation that ends up affecting adequate access to nutrients basic.

The CPI of the main products of the family basket generally increases over time, generating the inflation that we talked about, although also as said the opposite phenomenon is possible, that they go down, and that is known as deflation.

Inflation and deflation, two negative scenarios for the economy

A priori there is a tendency to believe that this decrease in prices is positive because it allows the consumer to buy more because they have plenty of money to do so.

However, deflation has negative effects on the economy of a nation.

When perceiving this situation, the consumer tends to withdraw thinking that prices will fall further and he will be able to buy even cheaper, but This decision generates in return that companies do not invest, impacting said action negatively on the economy general.

This purchase paralysis also causes sales to fall and employers have to fire employees because they cannot sustain expenses.

Both the described scenarios, inflation and deflation, are very inconvenient for the development and economic growth of any country.

By case it is that the monetary institutions and the political authorities must achieve the stability of prices and wages so that these remain in a Balance and do not generate those disorders.

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