Commodity substitution bias in the CPI refers to the fact that the CPI
A)takes into account the substitution of goods by consumers when relative prices change.
B)takes no account of the substitution of goods by consumers when relative prices change.
C)substitutes quality changes whenever they occur without taking account of the cost of the quality changes.
D)substitutes relative prices for absolute prices of goods.
E)accounts for improved quality in price rises.

Question

Quizplus · Accepted Answer

Commodity substitution bias occurs because the CPI does not account for consumers substituting cheaper goods for more expensive ones when relative prices change, leading to an overestimation of the cost of living.

Commodity Substitution Bias in the CPI Refers to the Fact