i CH. 8 COMPARISONS OF PURCHASING POWER 103

i

i representative of average expenditure in the two posi-

[ tions, which is thus common to both, by a, and those

' parts which are different by b x and b 2 . Where a rela-

i_ tively greater quantity of something is purchased in

one position than in the other, the quantity commonj to both positions is, of course, included in a, and only

J the excesses, peculiar to each position, in b x or b 2 as

the case may be. On the other hand, consumption,which is physically similar but not similar in real-income yielding capacity, owing to change of tastesor environment, must be included not in a but in b 1and b 2 . Further, the unit of quantity for b x mustbe such that the expenditure in the first positionon a unit of is in the same ratio to the expenditureon a unit of a as the total expenditure on is to| that on a ; and similarly with b 2 .

I Sometimes, moreover, we can get a little further

! than this by establishing an equivalence between a

l pair of commodities which are substitutes for one

i another. If, for example, 1 lb. of tea and 2 lb. of

coffee are alternative means of serving the same| purpose or nearly similar purposes with approxi-

mately equal efficiency, so that in both positionsunder comparison it would be almost a matter ofindifference to most consumers whether they pur-chased 1 lb. of tea or 2 lb. of coffee, provided theprices were the same ; but 1 lb. of tea is cheaper than: 2 lb. of coffee in the first position and dearer in the

second position, so that tea enters into the compositecommodity appropriate to the first and coffee into thatij appropriate to the second ; then we can fairly regard

i 1 lb. of tea and 2 lb. of coffee as approximately equiva-

j lent, without entering into any further complications.

Similarly if the national diet is different in the differentt positions, wheat or oatmeal or rye or potatoes being

substituted for one another, we can probably establish: reasonably satisfactory ratios of equivalence. To the

extent that we can employ this method of equivalent