Substitution bias arises if consumers change their purchasing behavior in response to relative price changes. Economic theory predicts that an increase in a good’s price will cause consumers to reduce their purchases of that good and instead purchase a substitute with a relatively lower price. The Boskin Report asserted that this was another important source of bias in the CPI, which at the time assumed no substitution. In 1999, BLS changed the way it calculated the CPI for many of the basic indexes, moving from a Laspeyres formula to a geometric means formula. (A basic index is an index for a particular item category and location; these basic indexes are the BUILDING blocks that are aggregated into the broader CPI measures, such as the all items index.) This NEW formula effectively presumes modest consumer substitution within item categories, correcting for what the Boskin Report termed “lower-level substitution bias.” That is, it assumes that consumers will substitute away from one brand or type of item, such as a steak or a car, as that brand or type becomes relatively more expensive compared with other brands or types of that product. It does not assume, HOWEVER, substitution between steak and chicken or between cars and bus fare.The geometric means formula does not correct for “upper-level substitution bias,” or substitution across item categories. Some argue that this omission is a reason that the CPI is still BIASED upward; others argue that the CPI should not assume any substitution at all. In any case, the use of geometric means for most categories has had the effect of lowering the CPI by 0.2 or 0.3 percent per year. (Some categories for which substitution is unlikely, such as SHELTER, utilities, and most medical care, are excluded.)The Chained Consumer Price Index (C-CPI-U), a supplemental index introduced in 2002, uses updated expenditure weights; rather than make any assumptions about substitution, it derives it weights from expenditure measures both before and after a price change. It is thus free of upper-level substitution bias. As would be expected, it tends to run slightly lower than the regular CPI-U. Therefore, those who believe that upper-level substitution bias is important can focus on this measure.I hope you like that please mark me as a brainlist please