Understanding Price Indexes and Prices

A Price Index is NOT the Price itself. Price Indexes measure the average change in prices between periods; they do not measure price levels.

Price is the amount of money given or set as consideration for the sale of a particular good or service. There are many types of price depending on the terms of the transaction.

On the other hand, Price Indexes measure variations in prices in a numerical series in relation to a base period. Put another way, Price Indexes are indicators that show how prices have varied over a period of time.

By way of illustration, widely used price indexes include the Consumer Price Index (CPI) and the Producer Price Index (PPI).

In short, the key difference is that Price Indexes measure just price changes, but do not express the prices themselves, as summarized in the table below:

	PRICE	PRICE INDEX
Definition	Amount of money for which something is sold	Indicators that measure how prices have varied over a period of time
Unit	Currency (e.g., US Dollar, Euro)	Dimensionless (based however on a specific currency)

Notes

Customers interested in prices of commodities are referred to Intratec Primary Commodity Prices
Learn more about the differences between the Intratec Primary Commodity Prices and Intratec Commodity Price Trends here
A detailed explanation of how price indexes are calculated can be found in Commodity Price Trends methodology.

Updated on: 03/06/2023