Download to read offline
More Related Content
Similar to PRICE INDEXES: OTHER CONSIDERATION/ abshor.marantika/ abshor marantika / Kelompok 6: Salsabila, helen, adinda syifa, rachel
PRICE INDEXES: OTHER CONSIDERATION/ abshor.marantika/ abshor marantika / Kelompok 6: Salsabila, helen, adinda syifa, rachel
- 1. Adinda Syifa Nabilah/2201847044 HelenNurwahid Yasputri Gea/2201852416 Rachel Angelia Buntang/2201840095 Salsabila Putri/2201838374
- 2. The primary purposeof a price index is to measure the price change over time for a specified class of items,products, so on.Several other issues must be concidered to enhance our understanding of how price indexes are constructed and how they are used. Considerations that affect the price indexes, among others :
- 3. Whenever class ofitems is very large, the index cannot be based on all items in the class. rather, a sample of representive items must be used. By collecting price and quantity information for the sampled items, we hope to obtain good idea of price behaviour of all items that the index is representing.
- 4. all future valuesof the index are then related to the base period value. The base period for most indexes is adjusted periodically to a more recent period of time. As a rule, the base period should not be too far from the current period.
- 5. Price indices oftencapture changes in price and quantities for goods and services, but they often fail to account for variation in the quality of goods and services. This could be overcome if the principal method for relating price and quality, namely hedonic regression, could be reversed.Then quality change could be calculated from price.
- 6. Two distinct conceptualbases for the CPI that have dominated the public discussion and are the most relevant for the work of the panel, which was long the basis for the CPI in the United States, and the cost-of-living approach, which was strongly recommended in the Boskin report. In somewhat more detail, the two approaches are:
- 7. A basket ofgoods is priced in each period and the price index calculated as the cost of the basket in the comparison period divided by the cost of the basket in the reference period. Because the goods in the basket are fixed across the comparison, we call this a “cost-of-goods index” or COGI.
- 8. The relevant basketfor a national CPI is the set of all goods and services bought by consumers in the United States during a base period, and the prices are the market prices paid for those goods and services during the reference and comparison periods. The reference period often coincides with the base period but need not necessarily do so.
- 9. Prices in thecomparison and reference period are compared using the ratio of the cost of living in the two periods.Instead of comparing the costs of two baskets of goods, the comparison is between the cost of maintaining the same standard of living in the comparison and reference periods.
- 10. As a rule,the base period should not be too far from the current period. For example, a CPI with a 1945 base period would be difficult for most individuals to understand, due to unfamiliarity with conditions in 1945. The base period for most indexes is adjusted periodically to a more recent period of time.
- 11. An unconditional cost-of-livingindex is an unsuitable conceptual basis for the CPI. While research aimed at better understanding the economic effects related to changes in such matters as life expectancy, crime rates, or the environment would be useful for evaluating various aspects of public policy, the CPI should not change in response to changes in such factors. Within the general conceptual framework of cost-of-living indexes, the appropriate theoretical concept for the CPI is aconditional cost-of-living index that is restricted to private goods and services and in which environmental background factors are held constant.
- 12.
- 13.