The substitution bias in the CPI refers to the failure of statisticians to:
A)allow for the possibility that consumers switch from products whose prices are rising.
B)allow for the possibility that consumers switch stores at which they shop.
C)take into account improvements in goods and services.
D)take into account new products purchased by consumers.

Question

Quizplus · Accepted Answer

When prices rise sharply for a product, consumers shift away from it. Since the CPI uses a fixed basket of goods and services, this switching between substitute products is often missed, resulting in "substitution bias."

The Substitution Bias in the CPI Refers to the Failure