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The Retail and Consumer Price Indices

FoundationHigherAQAEdexcel

Practise The Retail and Consumer Price Indices for GCSE Statistics with this free worksheet and full mark scheme — Foundation and Higher exam-style questions with worked answers for AQA and Edexcel. The RPI and CPI are index numbers that measure changes in the cost of living over time.

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These worksheets and mark schemes are original, written for Virtus Academy and checked against the current AQA and Edexcel specifications. Every worksheet comes with a full mark scheme.

Foundation

WorksheetFoundation · PDFMark SchemeFoundation · PDF

Higher

WorksheetHigher · PDFMark SchemeHigher · PDF

Topic overview

The Retail Price Index and Consumer Price Index measure changes in the cost of living by tracking the prices of a basket of goods and services.

Both are weighted index numbers. The basket contains items households typically buy, and each is weighted according to how much of household spending it represents, so a rise in the price of a staple food affects the index more than the same rise in a rarely bought item.

The key difference is that the RPI includes housing costs such as mortgage interest payments and council tax, whereas the CPI excludes them. This means the two can give different figures for the same period, and the CPI is generally the lower of the two.

Revision notes

What they measure

Both track the changing cost of a basket of goods and services that households typically buy.

The basket is reviewed regularly so that it reflects current spending patterns — items falling out of use are removed and new ones added.

Weighting

Each item is weighted according to its share of household spending.

So a price rise in a staple food affects the index more than the same rise in a rarely purchased item. This is what makes them weighted index numbers rather than simple averages.

RPI versus CPI

The RPI includes housing costs such as mortgage interest payments and council tax.

The CPI excludes these. The two therefore give different figures for the same period, with the CPI generally lower. The CPI is used for the official inflation target.

Key points

  • Both measure changes in the cost of living.
  • They track a basket of goods and services.
  • Items are weighted by share of spending.
  • The basket is reviewed regularly.
  • The RPI includes housing costs.
  • The CPI excludes housing costs.

Worked examples

Example 1

State one difference between the RPI and the CPI. [1 mark]

Working

The RPI includes housing costs such as mortgage interest payments, whereas the CPI excludes themstate the difference

Example 2

Explain why the items in the basket are weighted. [2 marks]

Working

Households spend far more on some items than othersstate the reason
so weighting by share of spending means a price rise in a staple affects the index more than one in a rarely bought itemexplain the effect

Example 3

Explain why the basket of goods is reviewed regularly. [2 marks]

Working

Household spending patterns change over time as new products appear and others fall out of usestate the reason
so the basket must be updated to continue reflecting what people actually buyexplain the consequence

Common mistakes

  • Saying the RPI and CPI are the same.

    They differ in whether housing costs are included.

  • Forgetting that the items are weighted.

    They are weighted indices, not simple price averages.

  • Saying the basket never changes.

    It is reviewed regularly to reflect current spending.

  • Confusing which index includes housing.

    RPI includes it; CPI excludes it.

Exam tips

  • Learn the RPI and CPI difference precisely.
  • Explain weighting through share of household spending.
  • Note that the basket is regularly reviewed.
  • Link both to measuring the cost of living.

Key terms

Retail Price Index
A measure of inflation including housing costs.
Consumer Price Index
A measure of inflation excluding housing costs.
Basket of goods
The set of items whose prices are tracked.
Inflation
The rate at which prices rise over time.

Related topics

Written and reviewed against the current AQA and Edexcel specifications. Spotted an error? Let us know.