A Major Drawback of the Aggregate Price Index Is That

question 111

Multiple Choice

A major drawback of the aggregate price index is that:

• A)It does not take into account the fact that some items in the market basket are purchased more frequently than others.
• B)It is difficult to compute.
• C)It is computed by using the values from a single time series or based on a single product.
• D)Percentage comparisons cannot be made to the base year.

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Definitions:

Consumer Behavior

The study of how individuals make decisions to spend their resources on consumption-related items.

Marginal Utility

The boost in satisfaction from the consumption of an additional item of a good or service.

Total Utility

The overall satisfaction or pleasure a consumer derives from consuming a certain quantity of goods or services.

Marginal Utility

The extra fulfillment or advantage a person gains by consuming an additional unit of a product or service.