How the Consumer Price Index Measures Inflation

Miacademy & MiaPrep Learning Channel

This educational video provides a comprehensive introduction to the Consumer Price Index (CPI), a critical economic indicator used to measure inflation. The host breaks down complex economic concepts into digestible segments, starting with a definition of inflation and moving into the specific mechanics of how the CPI is calculated using a theoretical "basket of goods." The video uses clear visuals and relatable examples to explain how economists track price changes across over 200 categories of goods and services, from housing and healthcare to food and transportation. The content goes beyond simple definitions to critically analyze the limitations of the CPI. It discusses nuances such as quality improvements in products, the introduction of new goods, income inequality, and the relationship between price hikes and wage growth. The narrator explains why CPI might not perfectly reflect an individual's personal cost of living and how different demographics experience inflation differently. This critical lens encourages students to look at economic statistics as useful but imperfect tools that need context. Finally, the video connects these macroeconomic concepts to personal finance and government policy. It explains how understanding CPI affects individual budgeting, career choices, and long-term planning like saving for college. It also touches on how governments use this data to enact policies like interest rate adjustments. This makes the video highly applicable for high school Economics, Civics, and Financial Literacy classrooms, bridging the gap between abstract economic theory and real-world decision-making.