"Please explain the Consumer Price Index and its relevance in layman's terms."

Consumer Price Index The CPI measures the price paid by consumers for a fixed group of goods and services. Changes in the CPI over time constitute a common measure of inflation.

In life, the cost of something changes. But why? It ISN'T just based on the goods costing more. It could be because money is worth more, or materials cost more. We need to have a way to know if something is costing more "compared" to 10 years ago. Just because something costs $5 more, doesn't mean it "costs more" when you compare it to how much someone makes.

In economics, a consumer price index is a statistical time-series measure of a weighted average of prices of a specified set of goods and services purchased by consumers. It is a price index that tracks the prices of a specified basket of consumer goods and services, providing a measure of inflation. The CPI is a fixed quantity price index and considered a cost-of-living index. It is also known as the Retail Price Index in the UK.

The CPI can be used to track changes in prices of goods and services purchased for consumption by households, i.e., of the consumer basket. User fees (such as water and sewer service) and sales and excise taxes paid by the consumer are also included. Income taxes and investment items (such as stocks, bonds, life insurance, and homes) are not included.