The "New Product Bias" in the Consumer Price Index Refers

question 280

Multiple Choice

The "new product bias" in the consumer price index refers to the idea that

• A)consumers switch to new goods when the prices of old goods increase, and the CPI overestimates the cost to consumers.
• B)consumers switch to old goods when the prices of new goods increase, and the CPI underestimates the cost to consumers.
• C)consumers prefer new goods, even if they are worse in quality than old goods, and this causes the CPI to underestimate the cost to consumers.
• D)new products' prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers.
• E)new products are often over represented in the basket as consumers move quickly to adopt new technology and then buy fewer units as time passes.

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Definitions:

Two-Tailed

A statistical test where the critical area of a distribution is two-sided and tests whether a sample is either greater or less than a certain range of values.

Negative Number

A real number that is less than zero, indicating a direction opposite to positive numbers.

Null Hypothesis

A type of hypothesis used in statistics that proposes there is no statistical significance between two variables, or that a statement of no effect or no difference will be true.

Two-Tailed

In hypothesis testing, it refers to the methodology that considers both directions of a possible effect, allowing for investigation of deviations in two opposite directions from the null hypothesis.