When the price of gasoline rises,some consumers begin riding their bikes more frequently or riding the bus instead of driving their cars.The fact that the CPI does not fully account for such changes in consumer behavior is called
A)outlet bias.
B)increase in quality bias.
C)substitution bias.
D)discrimination bias.

Question

Quizplus · Accepted Answer

The fact that the CPI does not fully account for changes in consumer behavior, such as switching to biking or riding the bus, is known as substitution bias. This is because the CPI assumes that consumers will continue to purchase the same items regardless of price changes, which is not always the case in reality. Outlet bias refers to the CPI not accounting for purchases made at non-traditional retailers, while increase in quality bias refers to the CPI not accounting for improvements in the quality of goods over time. Discrimination bias is not a term commonly used in discussing CPI measurement issues.

When the Price of Gasoline Rises,some Consumers Begin Riding Their