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    As I understand it, real wages do increase over time , as an economy grows and productivity increases. If this is the case , why can we not all afford to buy very expensive goods / services in 50 , or 100 years time ? It can not be because of inflation as by definition real wages have factored inflation in.

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    Solution Preview

    There are two reasons for this issue.

    First, the "inflation" is measured by the prices of a bundle of representative goods. But the bundle doesn't include every product in the market, and the structure (shares) of the goods are changing over time. So when we say "real wage", ...

    Solution Summary

    Articulate how inflation is measured.