In a normal world, price indexes ought to be used when determining changes in the cost of living and as a comparison tool between two regions or countries. During data collection for the information to be used in the price indexes care should be taken to remove other factors that could lead to price changes.
There are various price indexes at the disposal of policymakers and economists. These indexes include; producer price index (CPI), consumer price index, and housing price index (HPI). CPI is expressed as an average of prices that urban consumers will have to pay for a basket of commodities (Index, 2014). The housing price index is the average prices of family houses (single) (Wu, Deng & Liu, 2014). The CPI and the HPI affect citizens directly as opposed to producer price index. In this paper, we will be analyzing these two indexes and how they are related and differ to each other.
Both indexes have composite values hence there is a possibility that they will differ due to their constituent changes. Price movements can be caused by various factors such as pull by demand and supply and this also affects the trends in these indexes. In some cases, one change in a certain factor could affect prices across the board caused by the multiplier effect. Housing Policy in the United States.
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