Substitution bias is a problem when measuring the consumer price index because A) consumers are eager to buy new products as they are introduced, despite their lack of full information about the quality of those products until they buy and use them. B) consumers are slow to adjust their buying patterns from year to year in response to price changes. C) the introduction of new goods gives consumers access to a greater variety of products. D) prices of goods and services do not change in the same proportion from year to year.

Question

Duckling

Business

16 January, 02:39

Substitution bias is a problem when measuring the consumer price index because A) consumers are eager to buy new products as they are introduced, despite their lack of full information about the quality of those products until they buy and use them. B) consumers are slow to adjust their buying patterns from year to year in response to price changes. C) the introduction of new goods gives consumers access to a greater variety of products. D) prices of goods and services do not change in the same proportion from year to year.

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Denise Norton · Answer 1

Answer: D

Explanation: The prices of goods and services do not change in the same proportion from year to year.

Substation bias is a situation whereby the increase in price of a particular product makes the consumer opt for another alternative which is not necessarily in the same class of product.