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The traditional conceptualisation of a price index. The index measures the change in value of a fixed set of quantities - commonly described as a “fixed basket of good and services” - between two periods.

A fixed basket or fixed weight index is sometimes described as a “pure price index”.

Because the quantities or weights remain fixed, any change in the index is due to price changes only. In principle, there is no restriction on the quantities that make up the basket. They may be those of one of the two periods being compared, or they may refer to the quantities in some third period, or constitute a hypothetical basket such as an average of the quantities in the two periods. Moreover, the quantities may refer to a much longer period of time than the periods of the index: for example, quantities produced over a period of a year or more may be used for a monthly or quarterly producer price index (PPI).

Source Publication:
ILO, IMF, OECD, Eurostat, UNECE, World Bank, 2004, Producer Price Index Manual: Theory and Practice, International Monetary Fund, Washington DC.


Statistical Theme: Prices and purchasing power partities

Created on Monday, February 17, 2003

Last updated on Friday, July 8, 2005