An Example of the New Goods Bias in the Calculation

question 90

Multiple Choice

An example of the new goods bias in the calculation of the CPI is a price increase in

• A)butter relative to margarine.
• B)an iPod player relative to a Walkman.
• C)a 2013 Honda Civic Si Coupe relative to a 2013 Honda Civic Si Sedan.
• D)textbooks bought through the campus bookstore relative to textbooks bought through Amazon.com.
• E)a Caribbean cruise for a couple who has never been on a cruise before.

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Definitions:

Demand

The desire of purchasers, consumers, or clients for a particular good or service coupled with the ability to pay for it.

Cross-Price Elasticity

A measure of how the quantity demanded of one good responds to a change in the price of another good, indicating the relationship between the two products.

Peanut Butter

A food paste made primarily from ground dry roasted peanuts, often spread on bread or eaten with other foods.

Complements

Products or services that complement each other, enhancing their value or appeal when one is used or consumed alongside the other.