Assume that the base period for CPI calculations is 1980.In Australia in 2011,around 24 per cent of people accessed the internet through a broadband connection that did not exist in the 1980s.This potential for bias in the CPI is referred to as ________ bias and results in ________.

Question

Quizplus · Accepted Answer

This is an example of new product bias, as the broadband connection did not exist in 1980 and is a new product. This bias results in the CPI overestimating the true change in the cost of living, as the increase in prices for new products is not fully reflected in the index.

Assume That the Base Period for CPI Calculations Is 1980