Principles of Macroeconomics / Unit 6 MAC 0503 short lesson, about 20 seconds
The Basket and the Price Level
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The idea
The price level is the cost of a basket of goods and services a typical buyer buys. Items are weighted by how much is actually bought.
In practice
A ten percent rise in rent moves the level far more than a ten percent rise in carrots.
Where people slip
Without weights the index would treat every price as equally important, which no household does.
Your place on the trail
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