What Does "Substitution Bias" in the Consumer Price Index Refer

question 128

Multiple Choice

What does "substitution bias" in the consumer price index refer to?

• A) replacing old goods with new goods in consumer purchases
• B) replacing low-quality goods with high-quality goods in consumer purchases
• C) replacing expensive goods with cheaper goods in consumer purchases
• D) replacing old technology goods with new technology goods in consumer purchases

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Definitions:

Ending Merchandise Inventory

The final value of a company's inventory at the end of an accounting period, calculated by adding purchases to beginning inventory and subtracting cost of goods sold.

Gross Profit Rate

The ratio of gross profit to net sales, expressed as a percentage, indicating the efficiency of sales relative to the cost of goods sold.

Net Sales

The revenue from goods or services sold after deducting returns, allowances for damaged or missing goods, and any discounts allowed.

Operating Expenses

Operating expenses are costs associated with running a business day-to-day, excluding costs linked to producing goods and services.