The consumer price index is subject to substitution bias because: a. the law of demand applies to most, if not all, goods. b. some pairs of goods are complements rather than substitutes. c. some goods are inferior rather than normal. d. the index does not take into account the likelihood that consumers substitute newly-introduced goods for more-established goods.

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Business

Gianni Sharp

10 September, 17:54

The consumer price index is subject to substitution bias because: a. the law of demand applies to most, if not all, goods. b. some pairs of goods are complements rather than substitutes. c. some goods are inferior rather than normal. d. the index does not take into account the likelihood that consumers substitute newly-introduced goods for more-established goods.

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Emiliano Benjamin · Answer 1

the law of demand applies to most, if not all, goods.

Explanation:

The goods might be replaced as the demand for a good is always influenced by price. Therefore if the consumers are expending in a market basket this could change because there might be new goods that replace existing ones within the basket.