Question 6

The Office for National Statistics publishes the Retail Price Index (RPI) and

related data (www.ons.gov.uk/economy/inflationandpriceindices). Price

ratios and weights from the year 2020 are listed in Table 2. (The base date

was January 1987.)

(a) Why are pensioner households and high-income households excluded

from the RPI? Justify your answer.

(b) By considering the price ratio for 'Food and catering' in Table 2,

comment on whether the food and catering prices in November 2020

have increased or decreased relative to January 2020. Justify your

answer. (You do not need to calculate the percentage change.)

(c) Using the data given in Table 2

(i) Show that the unrounded all-item price ratio for November 2020

relative to January 2020 is 1.009953.

(ii)

The value of the RPI in January 2020 was 290.6. Using the

all-item price ratio given above in part (i), find the value of the

RPI in November 2020 rounded to one decimal place.

(d) An RPI index-linked pension was £733 per month in January 2020. The

value of the RPI in January 2021 was 294.6. How much should the

pension be per month in January 2021? Please give your answer

rounded to the nearest pound.

(e) Using relevant values of the RPI, calculate the purchasing power of the

pound in January 2021 compared with the base date January 1987.

Please give your answer rounded to the nearest penny.