By Not Taking into Account the Possibility of Consumer Substitution

Multiple Choice

By not taking into account the possibility of consumer substitution, how is the CPI biased?

A) It understates the cost of living because people buy more of the newer goods.
B) It overstates the cost of living because people buy more of the cheaper goods.
C) It understates the cost of living because people have higher incomes and perceive some goods as inferior.
D) It overstates the cost of living because people have higher incomes and perceive formerly luxury goods as necessities.