1. Education
Send to a Friend via Email

Substitution Bias

By

Definition: Substitution bias is a possible problem with a price index. Consumers can substitute goods in response to price changes. For example when the price of apples rises but the price of oranges does not, consumers are likely to switch their consumption a little bit away from apples and toward oranges, and thereby avoid experiencing the entire price increase. A substitution bias exists if a price index does not take this change in purchasing choices into account, e.g. if the collection ("basket") of goods whose prices are compared over time is fixed.

(Econterms)

Terms related to Substitution Bias:
None

About.Com Resources on Substitution Bias:
None

Writing a Term Paper? Here are a few starting points for research on Substitution Bias:

Books on Substitution Bias:
None

Journal Articles on Substitution Bias:
None

©2014 About.com. All rights reserved.