ABSTRACT

Purchasing power is attributed to an income taken as an indivisible whole. It does not bear on money which is not thus specifically identified. The object of purchasing power measurement is to decide the relation between incomes which are to be considered as having the same purchasing power in two periods in which prices are different. In principle this could be any monotonic increasing relation. But in usual practice it is established as a homogeneous linear relation, determined by a single number, the ‘price index’, which gives the slope of the relation.