Answer to Question #307471 in Macroeconomics for geoffroy

Question

Why officially reported inflation rate does not have to properly represent inflation that an individual consumer faces?

Answer 1

Official inflation represents an overall inflation rate of a product or economy as a whole, which do not reflect individual inflation. Individual inflation is affected by many factors including product quality, new products, product substitutions, and individual buying habits. A few variables are left out when calculating the inflation rate of a product, which makes the official inflation rate and that of individuals to be different. Moreover, it is not practical to obtain prices for all consumers transactions in a country, which makes the official inflation to be from a few samples of the population.