How is the Consumer Prices Index calculated and what are weights

• →The CPI is a weighted price index that measures the average change in prices faced by consumers over time.
• →Weights are assigned to each category of spending based on how much of a typical household's income is spent on it, for example, if housing accounts for 30% of average expenditure, it receives a weight of 300 out of 1,000. This means that a rise in the price of housing has a much greater effect on the overall index than an equivalent rise in the price of less frequently bought goods such as postage stamps.
• →As a result, the index reflects real consumer behaviour rather than treating every good as equally important.
• →Therefore, a 10% rise in food prices will push the CPI up by more than a 10% rise in the price of alcohol and tobacco, because food carries a higher weight in the basket.

The table below shows a simplified example of how the CPI is calculated using weights:

Even though leisure prices rose, its low weight means it contributes very little to the overall index. Energy's high price rise combined with a significant weight drives the largest contribution. The overall CPI rise of 11.6% reflects the importance of each category to a typical household's spending.

• →The basket of goods: The CPI is based on a representative basket of around 700 goods and services, updated annually to reflect changing spending patterns. Items enter and leave the basket as consumer behaviour shifts.
• →Weights and their source: Weights are derived from the Living Costs and Food Survey, which tracks household spending. A category with a weight of 150 out of 1,000 means it accounts for 15% of a typical household's total expenditure.
• →How weighting affects the index: To calculate the weighted price change, the price relative (current price ÷ base year price × 100) for each category is multiplied by its weight, and the results are summed and divided by the total weight (1,000). A large weight amplifies the contribution of that category's price change to the overall index.
• →Why weights matter for accuracy: Without weighting, the CPI would overstate the impact of price changes in minor categories and understate changes in major ones. Weighting ensures the index accurately captures the inflationary pressure households actually experience.
• →Limitations arising from weights: Because weights are based on average household expenditure, the CPI may not accurately reflect the inflation experienced by specific groups — for example, low-income households tend to spend a larger share of income on food and energy, so when those prices rise sharply, their effective inflation rate may exceed the headline CPI figure.

• →This question tests understanding of how index numbers are constructed and interpreted, specifically the role of weights in making a price index representative of actual consumer spending patterns.
• →For AQA students, this maps to spec point 4.2.1.3 — Uses of index numbers, which requires knowledge of how index numbers are constructed and how changes in them are measured and interpreted.
• →For Edexcel students, this falls under spec point 2.1.2.b, which covers the measurement of consumer price inflation including the methodology behind the CPI.
• →Both specifications require students to move beyond simply knowing that the CPI exists and instead demonstrate understanding of the mechanics that make it a meaningful economic indicator.

Examined 3 times across AQA and Edexcel since 2017.

The AQA appearances have been brief objective questions, while the Edexcel entry demanded a developed explanation, reflecting the different ways boards have tested the same underlying concept.

• →Measurement of Macroeconomic Performance (Advanced) — useful for understanding the broader context of how economists measure economic performance, including the limitations that affect price indices alongside output measures.
• →Measures of Economic Performance — covers the full suite of macroeconomic indicators, placing CPI calculation within the wider framework of how inflation, growth and unemployment are tracked.