You're describing an "income effect." There's also a "substitution effect." The fundamental idea is that people will change their purchases in response to changing prices. If there's a sale on bread, then you might pick up an extra loaf (substitution effect). But if you were a peasant mainly eating bread, then you might actually purchase less bread and more cheese (income effect).
Inflation statistics should correspond to what people buy, like an average across households. That's essentially what the government statistical agencies attempt to do using some combination of (1) actual market transactions, and (2) household surveys. Inflation stats are definitely imperfect--but not so obviously flawed as you suggest (weighting TV prices the same as energy prices).
Since inflation numbers are an average across households, inflation will certainly differ across households. (For some it will be higher, and for others it will be lower.) It's particularly concerning when food, energy, and housing inflation are higher than other categories (as they are today). Poorer households tend to spend more money on those staple goods. In that case, inflation will be higher for those households already less well off.
For anyone interested: "The Government Isn't Cooking the Books on Inflation"
>You're describing an "income effect." There's also a "substitution effect." The fundamental idea is that people will change their purchases in response to changing prices. If there's a sale on bread, then you might pick up an extra loaf (substitution effect). But if you were a peasant mainly eating bread, then you might actually purchase less bread and more cheese (income effect).
Maybe you'll substitute cheese for bread, but you're not going to substitute a TV and some extra pairs of jeans for your electricity and gas.
Inflation statistics should correspond to what people buy, like an average across households. That's essentially what the government statistical agencies attempt to do using some combination of (1) actual market transactions, and (2) household surveys. Inflation stats are definitely imperfect--but not so obviously flawed as you suggest (weighting TV prices the same as energy prices).
Since inflation numbers are an average across households, inflation will certainly differ across households. (For some it will be higher, and for others it will be lower.) It's particularly concerning when food, energy, and housing inflation are higher than other categories (as they are today). Poorer households tend to spend more money on those staple goods. In that case, inflation will be higher for those households already less well off.
For anyone interested: "The Government Isn't Cooking the Books on Inflation"
https://www.discoursemagazine.com/economics/2021/07/16/the-g...