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Politics : Ask Michael Burke
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To: Mike M2 who wrote (87189)12/19/2000 11:45:57 AM
From: Don Lloyd  Read Replies (1) of 132070
 
Mike -

...One example is geometric weighting - which assumes consumers substitute lower priced goods for higher priced goods- sounds reasonable except for housing and fuel but i suppose one can beat rising prices by moving in with their in-laws and using their cars. ...

I don't pretend to understand this subject, but I would have thought that the geometric weighting and the substitution effects were separate and independent, and not tied together.

Someone else may have a definitive answer, but my first order assumption would be that the geometric weighting deals with the method of combining the prices of different specific goods into a final price index and that the substitution effect deals with what price of a specific type of good is used.

Regards, Don
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