How are the weights on the various goods and services in the CPI basket determined?

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BlackTom AI · Accepted Answer

To understand how CPI weights are determined, we need to consider the method used to reflect consumer purchases. 
Option 1: 'a survey of households is conducted to determine how much of each good and service a typical consumer purchases' — This is the correct approach: government statistical agencies use household expenditure surveys to estimate the share of total spending allocated to each good and service, and these shares set the weights in the CPI basket. The reasoning is grounded in measuring actual expenditures to reflect what consumers buy rather than what they say they would buy in theory. 
Option 2: 'a survey of politicians is conducted to determine how much of each good and service a typical consumer purchases' — Politicians are not used to determine consumer spending patterns for the CPI; their views do not represent household purchasing behavior, so this would not yield valid weights.
Option 3: 'a survey of public servants is conducted to determine how much of each good and service a typical consumer purchases' — Public servants’ preferences or incomes do not define overall consumer expenditure patterns, so relying on this survey would distort the basket weights.
Option 4: 'a survey of economists is conducted to determine how much of each good and service a typical consumer purchases' — Economists’ opinions about typical purchasing patterns do not substitute for actual observed household expenditures; while economists contribute to methodology, the weights come from empirical expenditure data, not expert survey alone.

How are the weights on the various goods and services in the CPI basket determined?

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