Partiality on Account of Substitution and Introduction of New Products in Price Indices

Price indices are formed by using Laspeyres’s fixed weights formula. This formula has been mainly used because of easiness of calculation and understanding, restricting in such a way total costs. However, the index consequently does not reflect dynamic changes in consumerŐs selection of products when relative prices change, introduction of new products and disappearance of old ones. Consequently, that introduces the measurement mistakes into index.
The exact measurement of price and of their rate of change is predominant in almost all spheres of economy (conducting economic policy, measurement of economic growth, definition of amount and structure of indexed expenses and taxes, etc.). Boskin’s commission has established that a change in consumers prices index in USA overestimates the living costs change by approximately 1,1 percent yearly. Substitution accounts for 0,5 percent and the remaining 0,6 percent results from difficulties in qualitative adjustment and introduction of new products.
From 1,1 percent of partiality established in USA, it is believed that statistical bureaus can solve about 0,4-0,5 percent of substitution partiality in a relatively short term (in a year or something more). It is more difficult with qualitative changes and new products, but the usage of adequate statistical techniques and more frequent sample updating could enable to statistical bureaus to solve additional 0,2-0,3 percent during the forthcoming several years. The formula adjustment would demand considerable financial assets and it is momentarily not possible.
Such researches in the Republic of Croatia have not been implemented, and data about potential partiality size are not available. The problem of fixed weights is endeavoured to be solved by their updating at the beginning of each year by the price change index from previous year. New products have been observed during twelve months, and next year they are included in index calculation.