What Basket of Goods Is Used to Construct the CPI

question 57

Multiple Choice

What basket of goods is used to construct the CPI?

• A) a random sample of all goods and services produced in the economy
• B) the goods and services that are typically bought by consumers as determined by government surveys
• C) only food, clothing, transportation, entertainment, and education
• D) the least expensive and the most expensive goods and services in each major category of consumer expenditures

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Definitions:

Demand Decreases

Occurs when consumers are less willing or able to purchase a product at any given price, leading to a leftward shift in the demand curve.

Shift Left

A decrease in the supply or demand of a product in a market diagram, typically resulting in a lower equilibrium quantity and potentially a higher or lower equilibrium price.

Demand

The quantity of a good or service consumers are willing and able to purchase at various prices.

Normal Good

a good for which demand increases as the income of consumers increases and falls when their income decreases, assuming all other factors are constant.