Because the cpi is based on a fixed basket of goods, the introduction of new goods and services in the economy causes the cpi to

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Because the cpi is based on a fixed basket of goods, the introduction of new goods and services in the economy causes the cpi to

overestimate the cost of living. This is so because new goods and services cost more than existing goods and services. New goods and services are always of higher quality than existing goods and services. When a new good is introduced, it gives consumers greater choice, thus reducing the amount they must spend to maintain their standard of living. New goods and services cost less than existing goods and services.

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n200080 [17] · Answer 1 · 2022-01-23T22:52:16+03:00

Because the CPI is based on a fixed basket of goods, the introduction of new goods and services in the economy causes the CPI to overestimate the cost of living. This is so because when a new good is introduced it gives consumers greater choice thus reducing the amount they must spend to maintain their standard of living.