Which describes the product quality improvement bias in the consumer price index?
A) The quality often remains constant while the price continues to increase.
B) New versions of a product may have more features than older versions, and yet the price may not be higher.
C) New products become available and reduce the demand for old products.
D) Product quality tends to fall rather than rise with time even though price remains constant.

Question

Quizplus · Accepted Answer

The product quality improvement bias occurs when new versions of a product offer more or improved features without a corresponding increase in price, but the consumer price index may not fully account for these quality improvements, leading to an overestimation of inflation.

Which Describes the Product Quality Improvement Bias in the Consumer