A Modified Consumer Price Index

Abstract

It is well known that the Consumer Price Index (CPI), as a Laspeyres-type index, attempts to measure the average change in the prices paid by urban consumers for a fixed market of goods and services, and new samples for most item categories are routinely introduced over time to keep the CPI sample representative of consumer spending patterns. The CPI normally overstates the true rate of increase of the cost of living. In this paper, our main objective is to propose a new measurement in the CPI which combines with the gross domestic product (GDP). This new method will make the bias effectively decreased.