An example of the quality change bias, and not a new goods bias, in the calculation of the CPI is a price increase in

Question

Quizplus · Accepted Answer

The quality change bias occurs when there is a change in the quality of a product, but the price remains constant. In this case, the example of a 2011 GPS unit versus a 2008 GPS unit illustrates a quality change as the technology and features in the newer GPS unit may be superior to those in the older unit but the price remains constant. This would result in an inflationary effect on the CPI, even though the consumer is technically receiving a better product. The other options do not necessarily illustrate a quality change bias, but rather a new goods bias (A, E) or a substitution bias (B, D).

An Example of the Quality Change Bias, and Not a New