Approach to Calculation of the CPA Index
N = Actual total number of goods
N+ = Number of goods whose prices rose.
N- = Number of goods whose prices fell.
The calculation process is done through calculating the actual total number of goods included in the survey so that all the information concerning the commodity, especially the price, is obtained. N stands for the actual total number of goods. Then, prices of such goods are classified according to the rate of increase or decrease in the price. Accordingly, the number of commodities whose prices rose is shown as N +. The goods whose prices fell are coded as N-.
Then, the difference is found between the number of goods whose prices rose (N+) and the number of goods whose prices fell (N-), and subsequently the result is divided by the actual total number of goods (N). At this point, the result will be in fractions that are multiplied by (100) to obtain the percentage point of the CPA index, which means a significant total increase in prices when it is positive and a decline when it is negative; and stable when it equals nil. After obtaining the value of CPA Index, the result will be compared against the Sigma mean through which can be identified the kind of price increase or decline and whether it is significant, slight or stable.
The Sigma coefficient is the standard deviation of the CPA Index when prices change randomly with a probability of 5%, whether the price change is positive or negative.
Last Update: Tuesday 17 July 2007