An example of the new goods bias in the calculation of the CPI is a price increase in

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The example of the new goods bias in the calculation of the CPI is when there is a price increase in a new and innovative product (such as an iPod player) relative to an older product (such as a Walkman). This is because the CPI calculation assumes that consumers will always buy the same basket of goods, and may not account for new technology or products. Therefore, the increase in the price of the newer product will lead to an overestimation of inflation.

An Example of the New Goods Bias in the Calculation