A 2009 Chevrolet model has more horsepower than the 2008 version and is included in the BLS basket of goods.BLS attempts to account for this change in the market basket by

Question

Quizplus · Accepted Answer

The best choice is to adjust the price of the good to account for the quality change. This is because the change in horsepower represents a quality improvement in the good. Adjusting the price of the good to account for the quality change ensures that the inflation rate is accurately reflected in the CPI, which is the purpose of the BLS basket of goods. Dropping the good from the basket (choice A) or substituting in a different vehicle with the same horsepower as the 2008 model (choice B) would not accurately reflect the change in quality. Adjusting the share of the market basket allocated to transportation (choice C) would also not accurately reflect the change in quality of the specific good.

A 2009 Chevrolet Model Has More Horsepower Than the 2008