The Substitution Bias in the Consumer Price Index Refers to the

question 172

Multiple Choice

The substitution bias in the consumer price index refers to the

• A)substitution by consumers toward new goods and away from old goods.
• B)substitution by consumers toward a smaller number of high-quality goods and away from a larger number of low-quality goods.
• C)substitution by consumers toward goods that have become relatively less expensive and away from goods that have become relatively more expensive.
• D)substitution of new prices for old prices in the CPI basket of goods and services from one year to the next.

---

Definitions:

Prices

The monetary value assigned to goods and services, determining how much consumers need to pay to obtain them.

Production

The process of creating goods or services by combining various inputs like labor, materials, and technology.

Price L

A specific notation used to denote a certain price level in economic models or discussions.

Factor Prices

The costs associated with the inputs used in production, such as labor wages and capital rental rates.