To which of the problems in the construction of the CPI is the creation of the mobile phone most relevant?
A)substitution bias
B)introduction of new goods
C)unmeasured quality change
D)income bias

Question

Quizplus · Accepted Answer

The introduction of new goods is a problem in the construction of the CPI because it can lead to substitution bias, where consumers switch to cheaper alternatives that may have lower quality or different characteristics, leading to an overestimation of inflation. The creation of the mobile phone is relevant to this problem because it represents a new good that has become increasingly important in people's daily lives, but was not included in the CPI until the 1990s. Its introduction has since had a significant impact on the calculation of inflation and on consumers' purchasing habits.

To Which of the Problems in the Construction of the CPI