Which of the following is a reason why the CPI is not calculated as a simple average of all prices?
A) Some goods experience large price changes and the CPI would be too variable if computed by a simple average.
B) Goods differ in their importance in the average consumer's budget.
C) Some goods never experience price changes and the CPI would not be variable enough if computed as a simple average.
D) It would be difficult to compute a price index using a simple average of all prices.

Question

Quizplus · Accepted Answer

Goods differ in their importance in the average consumer's budget, meaning that some goods have a greater impact on the overall cost of living than others. Therefore, the CPI is weighted to reflect these differences and is not calculated as a simple average of all prices.

Which of the Following Is a Reason Why the CPI