1. How much can someone change the rate of inflation they face by changing what they purchase? Is this a serious overestimation problem with the CPI? Do you time your purchases around sales? Do you change your purchases because of sales? I think someone can change the rate of inflation by purchasing items that have not changed greatly in price or have even lowered in price. The issue arises whether those items hold weight in the basket that is used to determine the inflation rate. I am not a huge consumer of goods outside of food, so I do not really time my purchases around sales. When it comes to food, though, I do. I tend to plan my grocery list a bit around what is on sale that week and what I have a coupon for.
2. What about the distortion caused by improvements in goods? Do you think that is a serious problem in measurement? Back in the 1970’s my Dad purchased an early calculator. It handled addition, subtraction, multiplication, and division. It cost nearly $100. Phones have a similar challenge as do cars and even airport bathrooms. If your raise last year was 2% and inflation was 2% did you break even? Or did your life improve? The unmeasured quality improvements affect the inflation because the cost to of the improved products is often lower as time goes on. If my raise last year was 2% and inflation was 2%, I broke even. My raise went to cover the change in the cost of living by the same amount it went up. Although it could be argued that my life improved in other ways even if I broke even monetarily, which it definitely did. The last year of my life, although difficult, has been the best one yet.
My Journey into Macroeconomics 