Economics Consumer Price Index Cpi Questions Medium
The Consumer Price Index (CPI) accounts for changes in clothing and footwear costs through a process called "hedonic regression." This method takes into consideration the quality and features of clothing and footwear products over time.
To calculate the CPI for clothing and footwear, the Bureau of Labor Statistics (BLS) collects data on a representative sample of clothing and footwear items. These items are carefully selected to reflect the overall market and consumer preferences.
The BLS then analyzes the data to identify the specific attributes and characteristics of each item. For example, they may consider factors such as fabric quality, durability, design, and technological advancements in footwear.
Next, the BLS assigns a value to each attribute based on its importance to consumers. This is done through surveys and consumer feedback. For instance, if consumers place a higher value on shoes with better cushioning, the BLS will assign a higher weight to this attribute.
Once the attributes and their respective weights are determined, the BLS tracks changes in the prices of clothing and footwear items over time. If the price of a specific item increases, the BLS adjusts the CPI to reflect the change in quality or features of that item.
For example, if a pair of shoes becomes more expensive due to the addition of new technology, the BLS will adjust the CPI to account for the improved quality and features of the shoes.
Overall, the CPI uses hedonic regression to account for changes in clothing and footwear costs by considering the quality and features of products, and adjusting the index accordingly to reflect these changes.