Economics in Minutes by Niall Kishtainy

Author:Niall Kishtainy [Kishtainy, Niall]
Language: eng
Format: epub
ISBN: 9781782066507
Publisher: Quercus
Published: 2014-02-05T18:30:00+00:00

The cost of living

When the cocoa harvest fails, the price of chocolate naturally rises. Aside from consumers who spend most of their money on chocolate, this will not affect the overall cost of living very much, and at the same time other prices may well be falling. The cost of living as a whole goes up when many of the goods bought by consumers rise at the same time – as during periods of inflation.

The consumer price index is a way of capturing this. It is calculated by first compiling the basket of goods – apples, shirts, electricity, bus tickets and so on – bought by a ‘typical’ consumer, and calculating its total cost. Changes in the cost of living can be tracked over time by comparing the cost of the basket in different years. One complexity in measuring the cost of living arises from the fact that the typical basket of goods changes over time: in 1850 the basket would have contained lamp oil and candles, by 1980, these would have been replaced by electricity and televisions sets.

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