Q&A for How to Calculate CPI

Use the method shown above to compare prices from a given year with the analogous prices from the previous year.

CPI equation: (current price in X yr / base price in X yr) x 100

CPI shows the change in price for something over time. 100 is the base index.

No, you have described a consumer price index. A producer price index is a measurement of change over time in the prices received by domestic producers of goods and services.

Calculate the total price of a "basket of goods and services" available at the beginning of the focus period, and subtract that number from the price of a "basket" of the same goods and services available at the end of the focus period. Divide that number (the difference) by the first price. That gives you a non-annualized inflation rate if the focus period is not one year. To annualize it, divide the rate by you obtained by the number of years in the focus period. If the focus period is less than a year, divide by a fraction representing the fraction of a year in the focus period.

Multiply the old price by the CPI. Then add that number to the old price.

Yes, if prices are lower at the end of the focus period than they were at the beginning.