Wednesday

 

Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 8 The Data22 of Macroeconomics
Chapter 24 of 36 Measuring The Cost of Living
Section 6 of 15
The consumer price index (CPI) is used for measuring changes in the cost of living.
The CPI determines how much incomes must rise to maintain a constant standard of living.
Three problems with calculating the CPI are
-1- substitution bias
-2- introduction of new goods bias
-3- unmeasured quality change bias
…
-1- Substitution Bias
When prices change each year they all do not change proportionately, some prices rise more than others.
Consumers respond to these unequal price changes by
· buying less of the goods whose prices have risen
· buying more of the goods whose prices have risen less or fallen
If a price index is computed assuming a fixed basket of goods, it
· ignores consumer substitution
· overstates the yearly cost of living increase
…
Consider a situation of a basket of apples and pears, Table A.
In the base year 1 apples are cheaper than pears, so consumers buy more apples than pears.
The Bureau of Labor Statistics (BLS) designates the basket of goods with 2 apples and 1 pear.
The next year pears become cheaper than apples.
Consumers respond by buying more pears and fewer apples.
But the BLS uses a fixed basket, which assumes consumers continue buying the now more expensive apples in the same quantities as before.
…
Because of this substitution the index will measure a larger increase in the cost of living than consumers actually experience.
In the case of Table A, there has actually been no increase in the cost of living, in year 2 it remains $4 with zero inflation.
… …
substitution bias
daigai baiasu
…
Google Translate says daitai not daigai, which is correct?
Gemini:
You’ve hit on one of the trickiest parts of Japanese: the same kanji having multiple readings.
The short answer is: Both are technically correct, but "Daitai" is much more common in everyday speech, while "Daigai" is the preferred professional reading in economics.
Here is the breakdown:
1. 代替 (Daitai) – The Common Reading
This is the "standard" reading meaning “alternative” you will hear in most situations.
If you say Daitai to a Japanese person, they will understand you perfectly.
Most digital dictionaries and Google Translate default to this because it’s the most frequent usage in general Japanese.
2. 代替 (Daigai) – The Professional/Economic Reading
In specialized fields like economics, law, and accounting, many professionals use Daigai.
The Reason: This is used to avoid confusion with another common word, 大体 (Daitai), which means "roughly," "generally," or "mostly."
By saying Daigai, an economist makes it clear they are talking about "substitution" rather than "approximately."