How does the introduction of new innovations to the market (computers in the 1980s or cell phones in the 2000s, etc.) illustrate a shortcoming of the Consumer Price Index in gauging the cost of living?

Initially, the new items used to measure the consumer price index may not included the newest innovations , so the index may ignore a significant way in which the cost of living may be improving

Explanation:

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anthougo anthougo · Answer 2 · 2021-10-05T13:23:30+02:00

The introduction of innovative goods and services to the market are not factored into the calculation of the Consumer Price Index. This non-inclusion illustrates that there is a shortcoming in relying on the index to gauge the current cost of living.

The Consumer Price Index (CPI) is the measure of the price inflation of goods and services. The goods and services included are selected. It is a weighted index of a basket of goods and services.

Some of the recent innovations like the cell phones and computers that have reduced the cost of living for consumers are not immediately included in the basket of goods and services.

Thus, the non-inclusion of these innovations widely used by consumers in the basket of goods and services prominently shows one of its major shortcomings.

Learn more about the Consumer Price Index at https://brainly.com/question/23146120