. The substitution bias in the consumer price index refers to the idea that consumers the quantity of products they buy in response to higher price, and the official CPI does not reflect this and the cost of the market basket.

Change; overestimates

Explanation:

The substitution bias in the consumer price index refers to the idea that consumers change the quantity of products they buy in response to higher price, and the official CPI does not reflect this and overestimates the cost of the market basket.

The consumer price index (CPI) is a measure used to analyze and examine the weighted average or aggregate of prices of a basket of goods and services paid for by consumers such as medical, food, and transportation.

In Economics, the substitution bias is a limitation of the consumer price index (CPI) because it doesn't take into consideration the substitution effect of consumer's choice during inflation.

Generally, consumers usually choose to substitute a particular product with another having a cheaper price, when its price rise than the normal price they buy at. The consumer price index will still overestimate the cost of the market basket even when the consumer has substituted the particular product; consumer switching from an expensive product to a relatively alternative.

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answerindividual preferences are not revealed in the market for the good;