Why Does the Substitution Bias Cause the Consumer Price Index

question 115

Essay

Why does the substitution bias cause the consumer price index to overstate inflation and the cost of living? Why does the increase in quality bias cause the consumer price index to overstate inflation and the cost of living?

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Definitions:

Subjective Measure

An assessment based on personal opinions, feelings, or attitudes, rather than objective, measurable criteria.

Flying Buttresses

Flying buttresses are architectural elements used in Gothic cathedrals that transfer the weight of the roof and upper walls outward to external supports, allowing for higher and thinner walls and large stained-glass windows.

Nave Vaults

Arching forms in the central part of a church that are used to span the space over the nave, creating a ceiling or roof.

Apsidal Chapel

A semicircular or polygonal termination or projection in a church, which often houses the altar and is located at the east end beyond the choir.