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This historic book may have numerous typos and missing text. Purchasers can download a free scanned copy of the original book (without typos) from the publisher. Not indexed. Not illustrated. 1899 Excerpt:... Pierson shows may be possible are not at all likely to occur. The conclusion seems to be, therefore, that index numbers may be used as indicating, roughly at least, changes in price-level. Reflective Analysis. Effects of Changes in Prices. The most interesting question connected with prices is the effect of changes on the individual. In the case of single commodities we are accustomed to fluctuations which are of direct interest to the producer, the dealer, and the consumer. If the price of wheat goes down without corresponding decrease of cost of production, then the producer is injured. If the cost of living decreases while wages remain the same, then the labourer benefits. What happens now in case the whole price-level changes, either rising or falling? Suppose we find that prices have gone down 30 per cent. since 1867-77, what is the meaning of that to the community? It means primarily that what one hundred dollars could buy formerly, seventy dollars will buy now. Does that mean, however, tha an individual with seventy dollars is as well off now as he formerly was with one hundred dollars? That does not follow: first, on account of the imperfection of our method, and secondly, on account of psychological differences between individuals. The imperfections of our statistics have been already mentioned. Difficulties in regard to prices and quality, while not of importance in the objective index number, may be sources of considerable error when treating of the expenditure of individuals. More important is the fact that our index number rests upon wholesale prices, while the consumer is interested in retail prices. It is probably true that the prices of manufactured articles follow the prices of raw material; but they do not necessarily follow in the same p...