The following is from the Aug. 4, 2008, edition of The Dallas Morning News. SMU Economics Professor Mike Davis of SMU's Cox School of Business provided expertise for this story.
By PAMELA YIP
The Dallas Morning News
It's one of those government reports we see every month.
But what does the Consumer Price Index really mean to you and me? And how closely does the CPI – which measures inflation at the consumer level – truly represent what you're spending for goods and services in your life?
To be honest, it doesn't always match.
The CPI measures the average change in prices paid by urban consumers for a market "basket" of goods and services. The basket includes expenses such as food, fuel, pet food, rent, cigarettes, college tuition, prescription drugs and haircuts.
Because the CPI is a statistical average, it may not reflect your experience or that of specific families or individuals – particularly those whose spending patterns differ substantially from the average urban consumer. . .
"Those higher fuel prices affect people very differently," said Michael Davis, a finance and economics professor at Southern Methodist University. "I live relatively close to campus, and there are three or four days a week that I ride my bike [to work]. Gas can go up and it doesn't make much difference in my budget. I fill up my gas tank twice a month, and some people fill up their gas tank twice a week."
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