Suppose the quality of beef changes over time, but the quality change goes unmea

Question

Suppose the quality of beef changes over time, but the quality change goes unmeasured for the purpose of computing the consumer price index. In which of the following instances would the bias resulting from the unmeasured quality change be least severe The quality of beef deteriorates and beef becomes less expensive relative to other goods. The quality of beef deteriorates and beef becomes more expensive relative to other goods..The quality of beef improves and the price of beef relative to other prices remains unchanged. The quality of beef improves and beef becomes more expensive relative to other goods.

Explanation / Answer

In which of the following instances would the bias resulting from the unmeasured quality change be least severe?

D. The quality of beef improves and beef becomes more expensive relative to other goods.

(Current procedures in the CPI ignores price changes and incorporates into the CPI that price differentials entirely reflect the differences in service quality).

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