droans , 11 months ago (edited 11 months ago)

The basket used for CPI is adjusted annually to replicate the average expenses for a person.

The real issue is just how to measure items such as housing and education expenses.

Someone who bought a house 40 years ago probably isn’t paying anything. Twenty years ago and they’re only paying a few hundred. Five years ago and they’re paying a couple thousand. Renting today and they’re paying a bit more. Similar issue with education.

If you live in SoCal or another VHCOL area, you’re probably experiencing a different level of COL change than someone in the middle of Iowa.

And how do you handle the changes in the basket? Did consumer taste change or are people changing their buying habits to match their budget?

CPI is just a way to take thousands of variables and boil them down into one number.