posted by SARA
Which of the problems in the construction of the CPI might be illustrated by each of the following situations? Explain.
a. the invention of the Sony Walkman
b. the introduction of air bags in cars
c. increased personal computer purchases in response
to a decline in their price
d. more scoops of raisins in each package of Raisin Bran
e. greater use of fuel-efficient cars after gasoline prices increase
Do a little research and then take a shot. what to you think?
Hints: The CPI is calculated by looking at the change in prices of a "market" basket of goods. It does not deal well with 1) technological changes, 2) mandated changes, 3) improved qualities, 4) shifting of purchases in response to price changes, or 5) shifting of tastes
a. It suddenly became indispensible in daily life. And it replaced a lot of products like am/fm radios.
b. it became essential. and it saved lives which is hard to value.
c. increased productivity by workers tremendously. More people can work at home and cut travel time.
d. this did not happen. But if it did, it lowers the per raisin price and cuts profit for the raisin makers.
e. it makes 2 classes of cars where previously there had been only "cars" as a category..