Select the base year and current year
Choose the items to be included in the index
Collect prices for each item in both years
Decide the formula to use
Compute the simple price index if one item or equal importance is assumed
Use the formula: Price Index = (Current Price / Base Price) × 100
Compute the aggregate price index for multiple items if needed
Use the formula: Price Index = (Sum of Current Prices / Sum of Base Prices) × 100
Compute the weighted price index if items have different importance
Use the formula: Price Index = (Sum of Weighted Current Prices / Sum of Weighted Base Prices) × 100
Multiply each price by its weight before summing
Divide the weighted current total by the weighted base total
Multiply the result by 100
Interpret 100 as no change from the base year
Interpret above 100 as a price increase
Interpret below 100 as a price decrease