eco205_appendix_d - the country is doing better. • What...

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Axia College Material Appendix D Using the chart below, list three strengths and three weaknesses of the Consumer Price Index calculation. Strength Weakness 1. Monitors the prices of each product and services for each time in that period. 2. Also monitors the prices of all products and services at different times through out the time period 3. It measures and shows the cost of living changes for every year and can be compared to previous years. 1. Prices can change during the year 2. Does not measure the quality of the change in the products or services . 3. Does not measure the new products that enter the market during that year. Once your chart is complete, post a response to the following questions” What are the characteristics of the items listed as strengths? The items that are strengths that are listed can help explain why the cost of living has gone up a lot in the past couple of years . The consumer price index can show if there is any inflation and if the country is going in to a recession by comparing from previous years or if
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Unformatted text preview: the country is doing better. • What are the characteristics of the items listed as weaknesses? Quality is not measured there for some of the cheaper stuff consumers buy is not necessarily the best in the market, The items often break easily and consumers have to replace that item, which in turn makes it look like there is more spending going on. If the consumer would have spent the money on a product or service that had better quality then consumer spending would be less. • If the CPI is imperfect, why do we use it? It helps to measure how strong our economy is during the year and how much consumers are spending. It gives economists an idea of what products or services are doing better than others and how much people are spending on these products and services. This can also show if price gouging is going on in the market place. If the consumer price index shows any warning signs then the government can step in to fix it, if needed. ECO 205...
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This note was uploaded on 05/10/2009 for the course ECONOMICS 205 taught by Professor Janysek during the Spring '09 term at University of Phoenix.

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