I have come up with 3 strengths and 3 weeknesses of the CPI however I am confused on what the characteristics are of these items… any help would be appreciated.
Strenghts:
•The CPI provides a measure for inflation
•The CPI is stable as it is made of companies with a long good standing histories
•The CPI is balanced. It is made of companies from different industries
Weaknesses:
•Prices change from year to year but not all prices are changing at the same time (substitution bias)
•Variety causes change which is not computed into the CPI of fixed goods and services (Introduction of new goods)
•The quality of goods my deteriorate from one year to another causing the value of the dollar to fall while the price of the goods stay the same (unmeasured quality change)
Can someone help me in figuring out what is meant by "find the characteristics of the items listed as strengths and weaknesses?"
