Price indexes that employ fixed market baskets:

Question

Quizplus · Accepted Answer

Price indexes that employ fixed market baskets do not incorporate responses to changing relative prices. This means that it assumes consumers will continue buying the same set of goods and services regardless of price changes. However, in reality, consumers may change their behavior and switch to cheaper alternatives or reduce consumption of certain goods and services if prices increase. Therefore, price indexes that employ fixed market baskets may not accurately reflect changes in the cost of living experienced by consumers.

Price Indexes That Employ Fixed Market Baskets