An Example of the Commodity Substitution Bias in the Calculation

question 124

Multiple Choice

An example of the commodity substitution bias in the calculation of the CPI is a price increase in

• A)new homes because people's incomes have increased.
• B)e-books versus used books bought through the university bookshop.
• C)a GPS unit versus a Melways map book.
• D)a 2014 Toyota Camry versus a 2005 Honda Civic.
• E)turkey when the price of chicken doesn't rise.

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Definitions:

Behavioral Economics

A field of study that analyzes the effects of psychological, social, cognitive, and emotional factors on the economic decisions of individuals and institutions.

Status Quo

The existing state of affairs or current condition, typically used to describe situations before any changes are made.

Fairness

A concept involving impartial and just treatment or behavior without favoritism or discrimination, often considered in ethical, legal, and social contexts.

Behavioral Economics

A branch of economics that examines how psychological, emotional, cognitive, cultural, and social influences impact the economic choices made by individuals and institutions.