Substitution Bias

question 45

Multiple Choice

Substitution bias

• A)is one factor that causes the CPI to underestimate the inflation rate.
• B)is caused by the poor quality of many imported products.
• C)is one of the primary causes of inflation.
• D)involves consumer behaviour that helps explain why the CPI overestimates the inflation rate.

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Definitions:

Firm

An organization or business entity that produces goods or provides services with the aim of earning profits for its owners or shareholders.

Variable Costs

Expenses that fluctuate in direct proportion to the volume of production or output.

Fixed Cost

Costs that do not vary with the level of production or sales, such as rent, salaries, or insurance.

Lawn-mowing

The action or process of cutting the grass of a lawn, typically using a lawn mower.