Question

The effect of substitution bias is that the rise in the price of a fixed basket of goods over time tends to ___________________ the rise in a consumer’s true cost of living, because it doesn’t take into account that the person can substitute between goods according to changes in their relative prices. Group of answer choices

Answer 1

overstate

Step-by-step explanation:

As consumers can replace the goods on the market basket always based on the law of demand that establish that a consumer buys always depending on price.