Final answer:
The price index bias caused by technological innovations in consumer goods is known as quality/new goods bias. This bias results in an overstatement of the true rise in the cost of living because it does not fully reflect improvements or new products' introduction in the CPI. Option C is correct.
Step-by-step explanation:
The price index bias that results from technological innovations in consumer goods is quality/new goods bias. Quality/new goods bias occurs because, over time, the Consumer Price Index (CPI) calculated using a fixed basket of goods tends to overstate the true rise in the cost of living. It does not accurately account for improvements in the quality of existing goods or the invention of new goods. Traditional CPI measurement methods also overlook the value that these new and improved goods provide or fail to reflect their initial higher prices that typically decrease over time. As a result, the CPI may not capture the full extent of these technological innovations and their impact on the economy.