With Respect to the Consumer Price Index,the Substitution Bias Arises

question 190

Multiple Choice

With respect to the consumer price index,the substitution bias arises because

• A)prices of goods and services do not change in the same proportion from year to year.
• B)consumers are slow to adjust their buying patterns from year to year in response to price changes.
• C)consumers are eager to buy new products as they are introduced,despite their lack of full information about the quality of those products until they buy and use them.
• D)All of the above are correct.

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Definitions:

Factor Market

A marketplace for the services of a factor of production, such as labor, capital, and land.

Inputs

The resources (such as labor, materials, and capital) used in the production process to create goods or services.

Ceteris Paribus

A Latin phrase meaning "all other things being equal," used in economics to isolate the effect of one variable change in a model.

Demand Decreases

A situation where the quantity of a good or service desired by consumers lessens.