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Monday, September 23, 2019

Policy analysis Assignment Example | Topics and Well Written Essays - 500 words

Policy analysis - Assignment Example The second CPI-W is used to measure the wages for clerks and urban workers. These CPI do not account for substitution leading to the eventual overstatement of inflation (Cagan & Moore, 1981). Consumers change their spending pattern in response to relative price changes over time. This may be due to substitution of one commodity for another as the relative prices change. This result to changes in weights and therefore the price index that fails to note that change overstates the real and true variation in the cost of living. The economic value of life as non-economists think is not to be measured using the accounting measures such as the present value of lost earning. The value of life on the basis of preventing accidental deaths cannot be speculated using accounting measures. The economic value of life of an individual drawn from statistical analysis is higher than the actual present value of the earnings of the same individual when exposed to risk. Willingness-to-pay measures based on surveys may overstate the true willingness- to pay of the respondents because the surveys are based on samples from population which have a margin of error. Besides this respondents in surveys do not often respond to questions out of stability or preferences and are mainly inventing answers (Piros, 2013). As a result, the analysis shows bias on the true willingness-to-pay. Most smokers prefer to smoke presently while deferring the disadvantages in the future despite the cost increments in the cigarettes. This is because of the time value of money which entails the concept that money has value in the present than in the future. The cost benefit analysis of policies to reduce the smoking rate shows that consumers benefit less from smoking than the gains they receive. In this case, most smokers have future health problems resulting from smoking.

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