Living in Rifle, it’s evident that the cost of living is high, but there are certainly surrounding areas which have a much higher cost of living such as Aspen. I did not chose to live here but my parents say they did consider the high cost of living, but they estimated they would still be making a higher purchasing power due to the much higher wages than those in Arizona, and they were right.
Someone can change the rate of inflation that they face by not purchasing what they would normally purchase if the prices are too high. This would cause the CPI in that year to lower, and bring it closer to the CPI of the base year which would give a lower inflation rate. The inflation rate can increase due to a serious overestimation of the CPI because if the current CPI is much higher than that of the base year than you would have a higher inflation rate. I personally try to time some purchases, especially electronics clothing and other things that aren’t really necessities, around sales because that’s a good way to save some money and evidently it could help fight inflation. I don’t necessarily change my purchases around sales unless I purchase something that I see on sale that I didn’t even plan to buy, also known as an impulse buy.
The distortion caused by improvements of goods can cause not only for more sales of the product but also an increase in prices while still maintaining the higher sales. The reason why this is a problem in measurement is because this will show up as a higher inflation rate, which is true, but this is typically associated as something negative in the economy. In this case, an improvement on a good would not be a bad thing even though it would cause inflation. The product the consumer received is now priced higher, but the consumers continue to buy it because it is worth that higher price to them. If I were to receive a 2% raise but the inflation rate also rose 2%, I broke even because even though I’m now getting more dollars, each dollar has a lower purchasing power.
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