Changes in the cpi overstate the true inflation rate due to four "biases". if apple prices rise rapidly during the month while orange prices fall, consumers may reduce their apple purchases and increase their orange purchases.
which of the four biases is concerned with this tendency?
a. the new product bias
b. the substitution bias
c. the increase in quality bias
d. the outlet bias

the substitution bias

Explanation: The substitution bias shows the tendency of consumers of buying less costly good in place expensive one.

In the given case when the price of apple rises and the price of oranges falls then the consumer will purchase more of the oranges. In such a scenario the index will rise showing that the good which was purchased earlier by the consumers has risen however in the real world the consumer shave sifted their demand to a less expensive product.

Thus, it will lead to overstatement of substitution bias.

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.

answer; someone must cover the cost associated with the provision of scarce goods in both sectors;