Explain how the CPI underestimates inflation with respect to college tuition
What will be an ideal response?
The market basket used by the Bureau of Labor Statistics when calculating the CPI puts a weight of only 1.7% on college tuition and fees, but families with college students spend much more than 1.7% of their budgets on college tuition. The BLS estimates that the cost of tuition and other school fees rose about 500% from the CPI's base year (1982-1984), while the overall CPI rose about 125% over the same period.
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If the price of gasoline (a normal good) decreases, other things constant,
a. the demand for gasoline increases b. the demand for gasoline decreases c. the quantity demanded of gasoline increases d. the quantity demanded of gasoline decreases e. neither the demand for gasoline nor the quantity demanded of gasoline changes because everything is assumed constant along a demand curve
Which of the following most closely resembles a perfectly competitive market?
a. the airline industry b. the soft drink industry c. the wheat market d. long-distance telephone service