Ask Question
16 February, 02:30

By not taking into account the possibility of consumer substitution, the CPI

(A) understates the cost of living.

(B) overstates the cost of living.

(C) may overstate or understate the cost of living, depending on how quickly prices rise.

(D) may overstate or understate the cost of living, regardless of how quickly prices rise.

+4
Answers (1)
  1. 16 February, 03:19
    0
    (B) overstates the cost of living.

    Explanation:

    By not taking into account the possibility of consumer substitution, the CPI

    overstates the cost of living.

    This one of the limitations of the CPI which is Consumer product index.

    CPI is the weighted index of goods purchased by consumers. It does not take into account the availibilty of substitute goods in market and hence over estimates the living cost.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “By not taking into account the possibility of consumer substitution, the CPI (A) understates the cost of living. (B) overstates the cost of ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers