The basket used to calculate the Consumer Price Index (CPI) assumes that over time consumers
A) buy more products whose prices fall.
B) buy fewer products whose prices rise.
C) buy newly introduced products.
D) buy the same quantities of products no matter how prices change.
E) pay the same prices for products no matter how quantities change.

Question

Quizplus · Accepted Answer

The basket used to calculate the CPI assumes that consumers buy the same quantities of products no matter how prices change. This means that the CPI is based on a fixed basket of goods and services that represents the buying habits of a typical consumer. As prices change over time, the quantities of goods and services in the basket are adjusted to reflect changes in consumer behavior.

The Basket Used to Calculate the Consumer Price Index (CPI)