Market Basket

A market basket is a collection of goods and services used to measure changes in price levels and inflation over time. It typically includes a set of consumer goods that are representative of what households purchase regularly, such as food, clothing, and transportation.

Example

The Consumer Price Index (CPI) is calculated based on the price changes of a market basket of goods and services that the average household buys, such as groceries and fuel.

Key points

• A collection of goods and services used to measure inflation and price changes.

• Commonly used in economic indicators like the Consumer Price Index (CPI).

• Reflects the cost of living and purchasing power in an economy.

Quick Answers to Curious Questions

What is the purpose of a market basket?

It is used to measure changes in price levels and inflation by tracking the cost of a representative set of goods and services.

How is a market basket used in calculating inflation?

Price changes in the market basket are tracked over time to calculate economic indicators like the Consumer Price Index (CPI), which reflects inflation.