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.

Answer the following questions.

1)Why is this research of interest for macroeconomists in general and UK policy makers in particular? (5 marks)

3)Explain at least two reasons that, according to economic theory, might prevent business from changing consumer prices more frequently. (5 marks)