Commodity substitution bias _______ when the CPI is calculated in 2021 using the 2020 market basket because _______. A. exists; over time preferences change and people prefer to eat pizza rather than pasta B. does not exist; pizza and pasta
Commodity substitution bias _______ when the CPI is calculated in 2021 using the 2020 market basket because _______. A. exists; over time preferences change and people prefer to eat pizza rather than pasta B. does not exist; pizza and pasta
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter22: Inflation
Section: Chapter Questions
Problem 6SCQ: The Consumer Price Index is subject to the substitution bias and me quality/new goods bias. Are the...
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Commodity substitution bias _______ when the CPI is calculated in 2021 using the 2020 market basket because _______.
A.
exists; over time preferences change and people prefer to eat
pizza
rather than
pasta
B.
does not exist;
pizza
and
pasta
are not substitutes
C.
exists; people switch from the relatively more expensive
pasta
to the relatively less expensive
pizza
D.
does not exist; the CPI market basket is updated frequently to eliminate substitution bias
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