An example of the new goods bias in the CPI is the
A)switch from traditional car dealerships to low- cost Internet car buying services.
B)decreasing popularity of SUVs as the price of fuel has risen.
C)introduction of hybrid automobiles, vehicles that were not made until recently.
D)introduction of higher quality brakes as standard equipment on new cars.

Question

Quizplus · Accepted Answer

The new goods bias in the CPI occurs when new products are introduced and the CPI does not immediately reflect the value or price changes associated with these new goods. Hybrid automobiles are a new product that wasn't previously available, illustrating this bias.

An Example of the New Goods Bias in the CPI