Suppose the price of gasoline increases rapidly and consumers respond by buying a smaller quantity of gasoline.The consumer price index

Name: Suppose the price of gasoline increases rapidly and consumers respond by buying a smaller quantity of gasoline.The consumer price index
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The consumer price index (CPI) can overstate the impact of a price increase because it does not fully account for consumers substituting away from more expensive goods to cheaper alternatives, known as substitution bias.

Suppose the Price of Gasoline Increases Rapidly and Consumers Respond