Sunday, September 23, 2007

Deflationary Pressures

It's very common for economists to adjust prices and wages for inflation. It's a good practice, but often mistaken for the only adjustment needed to make the price "real." One of the points I've been harping on my class is that quality matters as well and for some products, easily overcome the increase in price. Few pictures illustrate this idea as well as the following:

(Note both of those have a memory of one gig.)
HT: Mike Mills

1 comment:

jeremy h. said...

The CPI is adjusted for quality. The adjustment is probably not perfect (what is?) but it's not like the BLS completely ignores quality. Russ Roberts got called on this recently as well: