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Applying Key Economic Concepts to CPI

While sitting in your office one evening, you begin to think about some of the key microeconomic messages you want to communicate to the Board. (Key concepts include, but are not limited to, supply and demand, pricing, competition, costs & production, and economic value added.) Pick two key concepts and discuss what you will present to the Board and why.

Discuss at least two key economic concepts in detail and articulate how they apply to CPI. For example; discuss the concept of supply and demand and how this concept affects CPI. Why would you present the key concepts you have chosen to the board? Do you feel they are of more importance than other key concepts? If so, why?

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The response addresses the queries posted in 727 words with references.
// Before explaining the two basic economic concepts and relating them to the consumer price index, we will describe what is a consumer price index (CPI). We have explained this concept below; for example://


Consumer price index is a measure of changes in the price level of consumer goods and services that are purchased by the households. It is used to measure the average changes in the prices that are paid for the goods and services by the urban consumer over a period of time. Consumer price index mainly affects all the U.S households in many ways. It acts as an economic indicator and as a deflator of other economic series. In addition to this, it is a means of adjusting the values of dollar (Chevalier, 2003).

The consumer price index represents the spending pattern of each consumer group. It is based on the expenditure of all the urban and metropolitan residents, which include poor, unemployed, professionals, retired people, as well as clerical workers and urban wage earners. The measurement is based on the existing market basket that contains detailed information of families and individual expenditure (Chevalier, 2003). All goods and services that are purchased by the ...

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The response addresses the queries posted in 727 words with references.