When Consumers Substitute a Cheaper Good for a More Expensive

question 36

Multiple Choice

When consumers substitute a cheaper good for a more expensive one, the CPI will ________ the change in the cost of living.

• A)equal
• B)understate
• C)precisely measure
• D)overstate

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Definitions:

Northeasterly

Pertaining to or coming from the northeast direction.

Indifference Curves

Graphs showing different bundles of goods between which a consumer is indifferent, displaying preferences for certain combinations of two commodities.

Intersect

The point at which two or more lines or paths cross or meet.

Indifference Curve

A graphical representation in economics indicating different combinations of two goods that provide the consumer with equal levels of satisfaction.