An example of the commodity substitution bias in the calculation of the CPI is a price increase in

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The commodity substitution bias occurs when consumers change their purchasing habits in response to changes in relative prices. In this case, if the price of turkey increases but the price of chicken remains the same, consumers may switch to buying more chicken instead of turkey. However, the CPI assumes that consumers will continue to buy the same amount of turkey despite the price increase, leading to an overestimation of inflation. This is an example of the commodity substitution bias.

An Example of the Commodity Substitution Bias in the Calculation