#12 - The consumer price index is a measure that detects

[est15]

I can see that there's a shift from discussing retail prices to discussing production costs in this paragraph, but how does that make the argument vulnerable? Don't production costs affect retail prices so the shift isn't really irrelevant?

[Steve Stein]

Hi,

That's an interesting question; the CPI is based on retail prices; reduction in the cost to produce such goods is, as you point out, a leap, because we can't just assume that the savings in production costs will get passed on to the consumer (even though, as you mentioned, that is sometimes the case).

I hope that's helpful! Please let me know whether this is clear--thanks!

Steve

[teddykim100]

Hello,

sometimes there are stimuli in which I can revisit again and again and yet the components will not stick out to me (too much to wade through).

This question is one of them. And as a result I have a hard time eliminating (A). If there is no change in a consumer price index some years, it would could relate to how the gov't benefits may not accurately reflect true change in costs incurred.

[Luke Haqq]

Hi teddykim100!

I share your impression that this stimulus is not the easiest to understand!

The conclusion of this stimulus is, "Therefore, the value of government benefits is sometimes greater than is warranted by the true change in costs." Part of what is confusing is the word "costs." Initially the sentences prior to the conclusion are discussing the "costs of living" (which is shaped by retail prices of goods and services), but then it switches to discussing "costs of production."

This confusion between the two is reflected in answer choice (E): the stimulus "makes an irrelevant shift from discussing retail prices to discussing production costs." The fact that this shift is irrelevant is what makes the stimulus particularly difficult to understand.