The Price of Inflation

There's been quite a lot of talk in Singapore lately about the levels that inflation is reaching, with the Consumer Price Index (CPI) rising by close to 4% on a year-on-year basis. I actually think that the CPI is a flawed measure of inflation, because it simply tracks price fluctuations in a stipulated basket of goods without regard to the quality of those goods. So, the actual effect of inflation felt by the man-in-the-street is likely to be more than 4% if he does not cut back on his spending, or substitute the more expensive goods for another cheaper one, of lower quality. (Well I am an armchair critic as I have no other better solution to offer the Department of Statistics, so CPI is imperfect but there seem to be no alternatives.)

This point was felt particularly actutely when me and E had dinner tonight at my favourite steamboat place, Thien Kee steamboat (basement of Golden Mile Tower), Thien Kee had about half a year ago increased prices from $18 to $20 for a small set. Today, we noticed that even for the small set, the quantity had shrunk very noticeably - e.g. instead of 3 prawns, they gave 2 prawns. Compounding the effect, this would equal a price increase of about 20% or more???

Sadly, since Thien Kee is not a substitutible good for me (nothing else will do), we will have to continue paying the increased prices. Unlike us however, the lower-income in Singapore don't have the luxury of being able to make such choices, and do they then suffer from a drop in the quality of life as the cost of living goes up?