The biases in the CPI include the

The biases in the CPI (Consumer Price Index) include the following:

1. New goods bias: The CPI does not take into account the introduction of new products into the market. As a result, it may overstate the inflation rate by not accounting for the increased value and variety of goods available to consumers.
2. Quality change bias: The CPI does not take into account improvements in the quality of products. As a result, it may overstate the inflation rate by not accounting for the increased value and functionality of goods available to consumers.
3. Substitution bias: The CPI assumes that consumers continue to buy the same mix of goods and services over time, regardless of changes in relative prices. However, if the price of a particular good or service rises, consumers may substitute it for a lower-priced alternative. The CPI does not fully take into account this substitution effect, which can result in an overstatement of the inflation rate.

New goods, quality change, and substitution biases