Author Question: List the four sources of bias in the CPI and briefly explain them. What will be an ideal ... (Read 112 times)

moongchi · **on:** Jun 29, 2018

List the four sources of bias in the CPI and briefly explain them.

What will be an ideal response?

Question 2

The total output produced with any quantity of labor is equal to the sum of the

A) marginal products of each of the workers hired.
B) average products of each of the workers hired.
C) total wages the firm pays its workers.
D) Both answers A and B are correct.

heyhey123 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

There are four potential biases. First is the new goods bias, which occurs when new, higher priced goods replace older goods. Second is the quality change bias, which occurs when the CPI fails to take account of quality improvements that raise prices. Third is the commodity substitution bias, which occurs when consumers shift their purchases away from goods whose relative prices rise toward lower priced goods. Last is the outlet substitution bias, which because with higher prices, people switch to low-cost discount stores.

Answer to Question 2

A