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A Linear Programming Model of the Consumer Price Index Food Component

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  • William G. Droms
  • David L Stone

Abstract

A linear programming model is used to measure the rate of inflation in the food component of the consumer price index A diet model to minimize the cost of a diet subject to constraints on nutritive requirements, variety, pal‐atabihty, and menu‐function is constructed and the rates of increase in a strict minimum cost model and an expanded constraint model are measured for the period 1980‐87 Consistent with the consumer utility literature, it is found that the current Laspeyres index approach to measuring the cost of living in fact provides an upper limit on true cost of living increases Results also show that the cost of maintaining a minimum level of subsistence increases more rapidly than the cost of a more palatable diet Finally, the results show that in fact there is very little room for substitution among food items within a reasonable diet model

Suggested Citation

  • William G. Droms & David L Stone, 1991. "A Linear Programming Model of the Consumer Price Index Food Component," American Journal of Economics and Sociology, Wiley Blackwell, vol. 50(4), pages 421-430, October.
    • Handle: RePEc:bla:ajecsc:v:50:y:1991:i:4:p:421-430
    DOI: 10.1111/j.1536-7150.1991.tb03337.x
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    References listed on IDEAS

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    1. Pollak, Robert A., 1983. "The treatment of `quality' in the cost of living index," Journal of Public Economics, Elsevier, vol. 20(1), pages 25-53, February.
    2. Goldberger, Arthur S. & Gamaletsos, Theodore, 1970. "A cross-country comparison of consumer expenditure patterns," European Economic Review, Elsevier, vol. 1(3), pages 357-400.
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