Conclusion
In this free course, Prices, location and spread, you have been discovering how statistics can be used to answer questions about prices. You have learned:
- how to find a single number to summarise the price of an item at a particular point in time, even though the item might be available from a number of sources
- how to combine information on prices across a range of goods and services
- how, through the use of price ratios, changes in price over time can be quantified
- how chained price indices such as the RPI and CPI measure changes in prices over time.
In particular, you have learned how the RPI and CPI are calculated by the Office for National Statistics from a ‘basket’ of goods using weighted means to give price ratios, group price ratios and all-commodities price ratios. These all-commodity price ratios are then chained to give the value of the index relative to a base date. The RPI and CPI can be used to calculate inflation, to index-link amounts of money and to calculate the purchasing power of the pound at one time compared with another.
This course has focused on the ‘prices’ element of the question, Are people getting better or worse off?. If prices are rising, then, other things being equal, we are worse off.
Another crucial element is ‘earnings’. If our earnings are increasing, then, other things being equal, we are better off.
However, other things are usually not equal – prices and earnings are generally changing at the same time. The question of how to deal with both sorts of changes at once is beyond the scope of this particular course (although it is dealt with in the Open University course from which this free course is drawn).
Test your understanding of this OpenLearn course by working through the end-of-course quiz [Tip: hold Ctrl and click a link to open it in a new tab. (Hide tip)] .
This OpenLearn course is an adapted extract from the Open University course M140 Introducing statistics. To see if you are ready to study M140 and/or to refresh you knowledge of related topics, see the Maths Help website. All of the modules here, except for the Geometry one, are relevant to M140.