(Price Indexes) E-readers and HDTVs have not been part of the U.S. economy for very long. Both goods have been decreasing in price and improving in quality. What problems does this pose for people who are responsible for calculating a price index?

(Price Indexes) E-readers and HDTVs have not been part of the U.S. economy for very long. Both goods have been decreasing in price and improving in quality. What problems does this pose for people who are responsible for calculating a price index?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter32: Macroeconomic Policy Around The World

Section: Chapter Questions

Problem 31P: Prepare a chart that compares India, Spain, and South Africa based on the data you find. Describe...

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5. (Price Indexes) E-readers and HDTVs have not been part of the U.S. economy for very long. Both goods have been decreasing in price and improving in quality. What problems does this pose for people who are responsible for calculating a price index?

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HDTVs and E-readers have not been a part of the economy of the US for very long. During the base year, both the items may not have been an important part of the average household budget so do they are not important goods for the whole economy as well. Therefore, their share of the basket in the current market will be understated. Both of these items have been decreasing in terms of prices and improving in quality. This can mainly 2 kinds of problems for the individuals who are trying to calculate the price index.

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