Question

____________ means that the rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer’s true cost of living because it does not account for how improvements in the quality of existing goods or the invention of new goods improves the standard of living.

Answer 1

Answer: Quality bias

Explanation: In simple words, quality bias refers to the mismeasurement that occurs when the economist did not consider the change in quality of the goods overtime.

Over the time, the world has seen some drastic change in technology leading to high quality goods. These high quality goods are relatively expensive but are used by every second individual in their daily life.

Thus, if the economist only considers the price aspect, it will lead to quality bias.