Interpreting the /cp If the Laspeyres price index rises by 5%,then consumers are 5%worse off the things they want to consume are 5%more expensive Potential Problems with the IcPI Technological change Original bundle no longer reflects actual purchases Ex:blood transfusions are now much safer than they were 50 years ago due to improved screening techniques Ex:polio vaccines have replaced treatments like the iron lung Bhattacharya,Hyde and Tu-HealthEconomicsBhattacharya, Hyde and Tu – Health Economics Interpreting the ICPI  If the Laspeyres price index rises by 5%, then consumers are 5% worse off  the things they want to consume are 5% more expensive  Potential Problems with the ICPI  Technological change ◼ Original bundle no longer reflects actual purchases  Ex: blood transfusions are now much safer than they were 50 years ago due to improved screening techniques  Ex: polio vaccines have replaced treatments like the iron lung