Baskets of Goods & Substitution Bias (Price Indices #3)

To compare price levels, fix some particular basket of goods and compare its price across the two countries. Sounds simple, except it isn't. One fundamental difficulty is substitution bias.

Feel free to leave me a comment below if you have any suggestions on how I can improve.

This is Part #3 in a series on Price Indices. Parts #1: https://goo.gl/gsAaWy, #2: https://goo.gl/UZic0Q, #4: https://goo.gl/E6whSN.

So far this series of videos has focused on international price comparisons (across space). I might make a Part 5 that briefly describes intertemporal price comparisons (across time) and explain how these are largely analogous, at least in theory.

My website: http://econcow.com/

Transcript: https://drive.google.com/open?id=0B6d...

Music: "Pacific Sun" by Nicolai Heidlas and "1950s Rock n' Roll Piano Riff" by rasputin1963.