The producer price index (PPI) and consumer price index (CPI) are both measures used to track and analyze inflation or changes in prices over time. However, they differ in terms of what they measure and who they are designed for.
The producer price index (PPI) measures the average changes in prices received by domestic producers for their output. It tracks the price changes of goods and services at the wholesale or producer level. The PPI includes prices of raw materials, intermediate goods, and finished goods. It is often used to examine inflationary pressures within the production process and monitor the price changes faced by producers before they reach consumers.
On the other hand, the consumer price index (CPI) measures the average changes in prices paid by urban consumers for a basket of goods and services. It tracks the price changes of various consumer goods and services, such as food, housing, transportation, healthcare, education, and entertainment. The CPI is designed to reflect the inflationary impact on consumer purchasing power and is widely used to calculate changes in the cost of living and adjust wages, pensions, and social security benefits.
In summary, the PPI measures price changes at the producer level, while the CPI measures price changes at the consumer level. The PPI focuses on goods and services during the production process, while the CPI focuses on goods and services purchased by consumers.
Differentiate between producer price index and consumer price index
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