Samantha goes to the grocery store to make her monthly purchase of ginger ale.As she enters the soft drink section,she notices that the price of ginger ale has increased 15 percent,so she decides to buy some peppermint tea instead.To which problem in the construction of the CPI is this situation most relevant?

Question

Quizplus · Accepted Answer

This situation is most relevant to substitution bias as it involves the consumer substituting one good (ginger ale) for another (peppermint tea) due to a change in price. Substitution bias occurs when the CPI does not account for the fact that consumers often substitute cheaper goods for more expensive ones, leading to an overestimation of inflation.

Samantha Goes to the Grocery Store to Make Her Monthly