Whilst not being a professional economist or statistician (I am an engineer by training), my current job (nothing to do with engineering) does require a lot of numerical work. I must admit to having a secret fascination with things numerical, and love nothing more than trying to make sense of a load of statistics. I also like to look behind the numbers, at cause and effect.
Although, the various ways of measuring inflation have nothing to do with my job, inflation is something I take a keen interest in. Inflation is something that is affecting everybody. It is now costing me an additional £20 to fill the tank of my car with diesel than a few months ago, and I know there are lots of other things that are now more expensive.
There are in fact two principle inflation rates. There is the Retail Price Index (RPI) and the Consumer Price Index (CPI) - for anybody who wants to fully understand the difference then the following link will explain much better than I can:
http://http://www.statistics.gov.uk/cci/nugget.asp?ID=19
The main difference between the two is that the RPI is always higher than the CPI because it includes such things as mortgage costs which are going up and the CPI includes plasma TV's which are going down. The really interesting thing about the two inflations is how companies use them. For example, my employer uses the lower CPI when negotiating a pay rise. Companies when selling stuff, usually use the RPI when applying price increases. The other thing about applying price increases based on inflation is that it is applied to the selling price and not the cost price. So any profit a company makes is also increased by inflation. A neat trick is to offer something "extra" in the deal, increase the price and then apply inflation to that as well, RPI of course.
So the next time you get an anual bill through the letter box, check what inflation has been applied, CPI or RPI and also if any extras have been included that you never asked for.
KW