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Suppose OPEC Succeeds in Raising World Oil Prices by 300

Question 177

Multiple Choice

Suppose OPEC succeeds in raising world oil prices by 300 percent. This price increase causes inventors to look at alternative sources of fuel for internal-combustion engines. A hydrogen-powered engine is developed which is cheaper to operate than gasoline engines. Which problems in the construction of the CPI does this situation represent?


A) Substitution bias and introduction of new goods
B) Introduction of new goods and unmeasured quality change
C) Substitution bias and unmeasured quality change
D) Income bias and substitution bias

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