Question

The price of computers has fallen substantially over the past two decades. Use this drop in price to explain why the Consumer Price Index is likely to overstate substantially the cost-of-living index for individuals who use computers intensively. The Consumer Price Index (CPI) is likely to overstate substantially the cost-of-living index for individuals who use computers intensively because O A. the CPI uses a weighting system that gives less weight to goods whose prices have risen and more weight to goods whose prices have fallen. B. the CPI uses fixed weights that do not account for increased purchases of goods whose prices have fallen. O C. the CPI compares the cost of current purchases at current-year prices with the cost of current purchases at base-year prices, which were higher for computers. OD. the CPI allows consumers to purchase more of goods whose price has fallen, increasing total consumer expenditures. O E. the CPI allows consumers to purchase more of goods whose price has fallen but not to purchase less of goods whose price has risen.

Answer 1

"C"

in the base year computer must be given a higher weightage and when compared to present price it will be overstated as the prices have fallen significantly. the answer is "C".