The price of computers has fallen substantially over the past two decades. This drop in price explains why the Consumer Price Index is likely to overstate substantially the cost-of- living index for individuals who use computers intensively. Find a right explanation from below. 1. O The Consumer Price Index measures the cost of a basket of goods purchased by a typical consumer in the current year in the absolute cost of the basket in the current market price. Thus, no benchmarking is needed. O 2. One problem with fixing the weights is that consumers will shift their purchases from year to year to give more weight to goods whose prices have fallen, and less weight to goods whose prices have risen 3. In addition, for non-typical individuals who use computers intensively, the fixed weight for computers in the basket will overstate the importance of this good, and will hence overstate the effect of the fall in the price of computers for these individuals. 4. The CPI will therefore give too less weight to goods whose prices have risen, and too much weight to goods whose prices have fallen. The CPI will understate the rise in the cost of living for this type of individual. 5. Each good in the basket is assigned a weight, which reflects the importance of the good to the typical consumer, and the weights are kept fixed permanently.