What is the Difference Between Current Price and Constant Price?

The difference between current price and constant price lies in the adjustments made for inflation.

• Current Price: This refers to the prices at a given moment in time, also known as nominal value. It is the actual price paid for goods and services in the economy and does not account for inflation. For example, if a brewer sells 10 litres of beer for €100 in 2019, the current price of beer is €100.
• Constant Price: This refers to real value, meaning it is corrected for changes in prices in relation to a base line or reference datum. Constant prices are used to measure the true volume growth, adjusting for the effects of price inflation. For example, if nominal Gross Domestic Product (GDP) rises from 100 billion to 110 billion, and inflation is about 4%, measured at constant prices, the second year GDP level would be approximately 106 billion, reflecting volume growth of 6%.

In summary, current prices are the actual prices without any adjustments, while constant prices are adjusted for inflation to provide a more accurate picture of the economy's true growth and activity.

Comparative Table: Current Price vs Constant Price

The difference between current price and constant price can be understood through the following table:

The key difference between current price and constant price is that constant price series are derived from current price series, and they are used to measure the true volume growth, adjusting for the effects of price inflation. For example, if the nominal Gross Domestic Product (GDP) rises from 100 billion to 110 billion, and inflation is about 4%, the second year GDP level at constant prices would be approximately 106 billion, reflecting volume growth of 6%.