Econ: What is General Price Level?

What is General Price Level? The General Price Level is a daily compilation of consumer prices for goods and services. The Consumer Price Index (CPI) is an index reflection of general price level.

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Transcript

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items It's been like this for years Same stuff every

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week You're a creature of habit And yes you have

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those digestive problems that you might want to check out

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But that's for another video OK overtime prices for the

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individual items move in all different directions Prices for some

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of the items might go up while prices for others

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might go down even when everything moves in the same

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direction While the prices don't change at the same rate

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some see big jumps in price Some barely see moves

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at all For instance in the past year the price

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of a can of chili rose from a buck forty

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six to a buck forty nine an increase of about

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two percent No big deal however Pickled kiwi rinds have

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jumped to seven dollars Sixty nine cents from seven dollars

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nine cents an increase of nearly eight and a half

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percent Yeah much bigger deal Meanwhile the price of anima

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tube's actually fell during the year leaking or dipping to

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six dollars forty nine cents from six seventy four Well

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those air individual price levels But what about general price

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levels Will the general price level is a measure of

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prices across an entire system not just the direction of

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a price the direction of all prices You know general

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prices Right So this week all the items in your

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grocery cart cost you twenty dollars Two cents That's your

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general price level If you want to make an economic

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indicator out of it well call it your personal general

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price indicator or PGP I once you know the general

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price level while you contract overall price changes over time

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So a year ago the four items that you buy

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every week totaled nineteen dollars Forty two cents This year

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Twenty dollars two cents Your PGP I rose three point

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one percent from last year And there's a map new

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minus old overalls that you get that percent growth formula

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thinking well In real life he's general price levels are

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used to track inflation or deflation though well it doesn't

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happen all that often deflating things People like to rattle

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off inflation stats but it's actually a tricky thing to

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really track Honestly you're fairly er accurately in a complex

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economy prices for various products are moving in different directions

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all the time and a different rates all the time

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Combining all this action into a single stat well is

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extremely complicated There are a lot of competing indicators that

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measure the general price levels in the overall economy The

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most high profile of these is the Consumer Price index

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or CP I It works like the total price is

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for your weekly grocery basket except that the CP I

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includes a big basket like a basket with a representative

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sample off of all the stuff people by at least

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all the stuff that CPS measures And it's like thousands

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of things Your personal consumer price index may include just

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those four items that you buy every week You know

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the basket where one in four of the items are

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enema tube But the C P I R consumer price

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index is a lot broader thousands of items that people

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die all the time or in that index So yeah

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enema to prices make up well hopefully far less than 00:03:13.87 --> [endTime] twenty five percent of that index What