Question
Tables 1 and 2 below are drawn from the article by Bunn P., Ellis C., (2012), Examining the behaviour of individual UK consumer prices, The
Tables 1 and 2 below are drawn from the article by Bunn P., Ellis C., (2012), Examining the behaviour of individual UK consumer prices, The Economic Journal, 122, 558, F35 F55. The aim of the research is to investigate the frequency with which UK consumer prices change. In order to carry out their investigation the researchers analyse the behaviour of individual UK prices using the data that are used in the construction of the UK CPI and using a database of supermarket prices collected from scanner data.
Provide an analysis of the evidence emerging from tables 1 and 2. (10 marks)
Table 1. Frequency of consumer price changes
Legend:
CPI excluding promotions: it is a measure of average prices that excludes goods that are subjected to some temporary discount or promotion;
Price reversals: they refer to situations where, following a rise or fall in any given price, the subsequent change is an exact reversal to the original price.
Table 2. Percentage of UK consumer prices that change each month
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