Changes

7.  Explain what the "CPI" is, and why the real price of a good is decreasing if its price remains constant while the CPI increases from year-to-year.  An example of this might be the real price of laptop computers from 2012 to 2013.

7.  Explain what the "CPI" is, and why the real price of a good is decreasing if its price remains constant while the CPI increases from year-to-year.  An example of this might be the real price of laptop computers from 2012 to 2013.

The CPI is the Consumer Price Index, which helps measure inflation from month-to-month, based on how prices change for a set of non-farming goods.  A CPI of "100" was the average for the period 1982-84. In January 2004, the CPI was 185.2, and in July 2009, the CPI was 215.351. This means that a dollar in 2009 was worth less than 1/2 the value of a dollar in 1982-1984, because a typical good (like a candy bar) cost nore than twice as much as a typical good in 1982-1984.

:The CPI is the Consumer Price Index, which helps measure inflation from month-to-month, based on how prices change for a set of non-farming goods.  A CPI of "100" was the average for the period 1982-84. In January 2004, the CPI was 185.2, and in July 2009, the CPI was 215.351. This means that a dollar in 2009 was worth less than 1/2 the value of a dollar in 1982-1984, because a typical good (like a candy bar) cost nore than twice as much as a typical good in 1982-1984.

:Laptop computers cost about the same in 2013 as 2012, but the CPI increased over that same time.  This means the value of a dollar decreased from 2012 to 2013.  If the same number of dollars can buy the same laptop in 2013 as 2012, than the real price of that laptop computer decreased

:Laptop computers cost about the same in 2013 as 2012, but the CPI increased over that same time.  This means the value of a dollar decreased from 2012 to 2013.  If the same number of dollars can buy the same laptop in 2013 as 2012, than the real price of that laptop computer decreased

:AVC_Q+1 = TVC_Q+1/(Q+1)

:AVC_Q+1 = TVC_Q+1/(Q+1)

:(answer in progress)

:(this answer not complete yet, but is still being written)