Recall Application 4, "The Introduction of Cell Phones and the Bias

question 45

Multiple Choice

Recall Application 4, "The Introduction of Cell Phones and the Bias in the CPI," to answer the following questions:
-Why were cellphones not included in the CPI basket immediately after it was introduced?

• A) Only one kind of phone can be included in the CPI basket, and in 1983, they were the landline phones.
• B) The cell phones were all made in Japan, so they were not included in GDP.
• C) Most American families did not have cell phones when they were first introduced.
• D) All of the above are correct.

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Definitions:

Income Elasticity

A measure of how much the quantity demanded of a good changes in response to a change in consumers' income.

Demand Inelastic

When the quantity demanded of a good or service is relatively unchanged in response to price changes.

Directly Related

A situation where two variables move in the same direction, meaning if one increases, the other also increases and vice versa.

Price Inelastic

Describes a situation where the demand for a good is not significantly affected by changes in its price.