Suppose the quality of televisions changes over time,but the quality change goes unmeasured for the purpose of computing the consumer price index.In which of the following instances would the bias resulting from the unmeasured quality change be most severe?
A)The quality of televisions deteriorates and televisions become more expensive relative to other goods.
B)The quality of televisions improves and televisions become less expensive relative to other goods.
C)The quality of televisions improves and televisions become more expensive relative to other goods.
D)The quality of televisions deteriorates and the price of televisions relative to other prices remains unchanged.

Question

Quizplus · Accepted Answer

When the quality of televisions improves, but the change in quality is unmeasured, the price of televisions will remain the same in the consumer price index. However, the actual value of the televisions will have increased, making the relative price of televisions to other goods higher. This leads to a severe bias in the consumer price index.

Suppose the Quality of Televisions Changes Over Time,but the Quality