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A changing-basket price index (Passche index) like the GDP deator tends to: an b. underestimate the change in the cost of living because it does
A changing-basket price index (Passche index) like the GDP deator tends to: an b. underestimate the change in the cost of living because it does not take into account that people can substitute less-expensive goods for ones that become more expensive. overestimate the change in the cost of living because the continual introduction of new goods makes consumers better off even if prices do not fall. underestimate the change in the cost of living because it does not reect the reduction in consumers' welfare that may result from the substitutions of less expensive goods for more expensive ones. overestimate the change in the cost of living because it takes into account that people can substitute less expensive goods for more expensive ones
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