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In concept quality embraces all the attributes of an item which consumers would consider before making a purchase. For example in the case of tinned tomato soup it would include the size of the tin as well as the concentration and taste of the contents.

Prices adjusted for changes in quality

As the CPI aims to measure price changes for a fixed basket of goods and services over time, identical or equivalent items must be priced in successive periods. However, products do change; their components or ingredients may change resulting in an improvement or degradation in quality. As the characteristics of products are altered, the statisticians responsible for the price index attempt to separate the effects of a quality change from any price changes so that the CPI measures ‘pure’ price change. A simple example of how adjustments are made for quality is shown in the last topic to this chapter, Example: Adjusting for quality.

Quality change can be difficult to measure

The requirement to take account of changes in quality, to ensure that the index reflects only pure price change, often poses difficult measurement problems and in some cases is impossible to do in practice. For example, while it is fairly easy to monitor changes in rail or bus ticket prices, it is difficult to attach a dollar value to changes in the frequency and punctuality of the service.