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Consumers may conclude that prices in their city increased at a faster rate than reflected by...

Consumers may conclude that prices in their city increased at a faster rate than reflected by changes in the CPI. How might it be possible for some consumers to experience more inflation than the national average reported by the CPI?

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Answer #1

The natural average or statistics are often reported as an average, but the average might not reflect the experience of any given individual. The CPI market basket is an average calculated to reflect the spending of the average urban household and not any specific individual. Since each individual buys a different basket of goods and services, every person has a different personal inflation rate. Personal inflation rate depends on how an individual spends his or her income. For example, if a person spends more on personal healthcare for which the average price has risen faster than most prices, this person’s personal inflation rate would be higher than the CPI inflation rate. When it comes to national statistics or CPI actual individual results may vary. This is why some consumers experience more inflation than the national average reported by the CPI.

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