Which of the following is a reason why the Consumer Price Index (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.
E) Actually,the CPI is a simple average of all prices.

Question

Quizplus · Accepted Answer

Goods differ in their importance in the average consumer's budget, and therefore should be weighted differently in the calculation of the CPI. A simple average would not take into account the varying importance of different goods, resulting in an inaccurate representation of inflation.

Which of the Following Is a Reason Why the Consumer