Good A and good B are substitutes in production. The demand for good A decreases, which lowers the price of good A. The decrease in the price of good A
A) decreases the supply of good B.
B) increases the supply of good B.
C) decreases the demand for good B.
D) increases the demand for good B.
Question 2
In 2000, you could buy a Cadillac DTS for 45,000. In 2011, the Cadillac DTS sold for 55,000.
While both models include anti-lock brakes and air bags (along with other similar features), the 2011 model also includes satellite radio and new technology that provides improved gas mileage and safer driving. If the Cadillac DTS was included in the CPI basket, it would create A) a downward bias in the inflation rate.
B) an upward bias in the CPI as a result of quality change bias.
C) an upward bias in the CPI as a result of commodity substitution bias.
D) a downward bias in the CPI as a result of new goods bias.
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