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In: Economics

Besides smartphones, come up with an example of a good that has increased or even decreased...

Besides smartphones, come up with an example of a good that has increased or even decreased in quality over time while the price has remained relatively constant. Explain how the change in quality could bias CPI.

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Expert Solution

Let us take the past 10 years for instance, now one can observe that the quality of mobile phones have increased but certain phones have remained same in terms of price. Let's say 8 years back the price of a 1 GB RAM phone is same as 3 GB RAM phone today. This tells us that the quality has increased over time but the price is constant where increase in CPI might not be adequate to prove this as the price remained same over years and therefore, it can create a bias.

Rahul Sunny answered 2 years ago
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