Substitution bias causes the CPI to understate the increase in the cost of living from one year to the next.

Name: Substitution bias causes the CPI to understate the increase in the cost of living from one year to the next.
Brand: Quizplus
Rating: 4.8 (27 reviews)

Question

Quizplus · Accepted Answer

Substitution bias causes the Consumer Price Index (CPI) to overstate the increase in the cost of living because it does not fully account for consumers switching to less expensive alternatives when prices change.

Substitution Bias Causes the CPI to Understate the Increase in the Cost