Commodity substitution bias

Commodity substitution bias is a problem with the calculation to find the change in an item's price change over time. 
It occurs when a new item which costs less is purchased instead of an item that was already available. This problem occurs because the CPI ( Consumer Price Index) is calculated from a "fixed basket" of goods and services. The CPI ignores the substitution of the inexpensive item for the expensive item. So CPI says the price of the expensive item had increased.
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Category:Economics