Question

How would you take into account the changes in the quality of the Beetle in calculating the increase in the price of a Beetle? (What if the 1998 Beetle was actually 20 percent better than the 1977 Beetle?)

Answer 1

Considering the price index to be same, if there is 20% better quality in 1998 than 1977, what happens is that the price would increase even more than 20 % and this is because of the fact that the increasing quality and also the increase in the brand recognition can enable them to increase the price to a greater extent and also when you consider the inflation rate in these 21 years the price would increase even more than that and therefore step by step you have to consider all these factors into account in order to understand the price changes