Poverty line, price index and inflation

Statistical indices sum up a whole society in one number. The poverty line is the least income one person needs to live for a month. The book takes it as half the median of the monthly incomes of the people. Someone who earns less than this line is below the poverty line.

The consumer price index says how the price of a fixed basket of goods (bread, rice, milk ...) compares with a base year. The base year has index 100: index = (cost of the basket this year ÷ cost in the base year) × 100.

Inflation is a general rise in prices. The inflation rate of a year is the percentage change of the index from the year before. If a salary stays the same while the index rises, the same money buys less.