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Substitution bias arises because a fixed basket cannot capture buyers switching toward goods that have become:
ALegally restricted
BRelatively cheaper
CRelatively dearer
DEntirely unavailable
Answer & Solution
Correct answer: B. Relatively cheaper
1. A fixed basket assumes buying habits never change.
2. The price level is measured from a basket of goods people typically buy.
3. Two problems arise here: substitution bias and quality or new goods bias.
4. Buyers respond to price changes by shifting what they purchase.
5. A fixed basket misses that shift toward relatively cheaper goods.
_Source: OpenStax Principles of Macroeconomics for AP Courses 2e (CC BY 4.0), Ch 8 'Inflation'_
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