Measuring Inflation using Consumer Price Index
Measuring Inflation using Consumer Price Index
looking for help on economics discussion post/ 2 paragraphs
We measure inflation using the Consumer Price Index (CPI), but the CPI is an imperfect measure of prices because of three problems. Identify those three problems and discuss whether they overstate or understate the level of inflation in the economy. In your discussion, analyze how by deviating from the “typical consumer” that the CPI attempts to track affects the problems in the CPI.
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Inflation is measured using the Consumer Price Index (CPI). CPI is a statistical estimate that is created using the market value of sample goods in a market over a certain period while inflation is the measure of changes in the cost of living (Kaplan, & Schulhofer-Wohl, 2017). However, using CPI for the measure of infatuation is however not efficient as it has some limitations. One problem with the use of CPI is that it does not account for the quality difference in similar goods (Goolsbee & Klenow, 2018). Sometimes, goods are varied in prices according to their mode of the provision as per their quality. High-quality goods fetched from high-end markets tend to be higher in pricing. This is one…
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