Economics - Unit 4 Lesson 2

Select FIVE general types of items that are included in the CPI basket.

- education - clothing - utilities - food - mortgages/rent

2010: CPI basket is $123.25. Today: CPI basket is $154.67. What is the CPI?

125.49

switching from takeout coffee to less-expensive soft drinks

commodity substitution effect

the tendency of people to respond to rising prices by buying cheaper substitutes of the particular good

commodity substitution effect

a measure of the amount of money required to buy a set list of basic goods—a market basket—in comparison to a base year

consumer price index

a decrease in prices due to decreased spending, which also leads to unemployment

deflation

failure to represent the greater value of new goods in the CPI index

new goods effect

installing a GPS unit in your automobile to replace paper maps

new goods effect

receiving a better value by purchasing items in an online auction

outlet substitution effect

the tendency to buy normal goods at reduced prices through places like outlet centers or online shopping

outlet substitution effect

the worth of a currency in relation to what it can buy

purchasing power

buying handmade French bread at a special bakery instead of the sliced white bread in a typical grocery store

quality change effect

failure to represent changes in the quality of goods in the CPI index

quality change effect