Substitution bias describes a possible bias in economic index numbers if they do not incorporate data on consumer expenditures switching from relatively more expensive products to cheaper ones as prices changed.
Substitution bias occurs when prices for items change relative to one another.
This change in consumption may not be reflected in the longstanding market basket from which a consumer price index is constructed.
If a selected good is bought by consumers and it is therefore included in the CPI basket, but when an increase in price of that selected good occurs customers may buy a cheaper substitute, while the CPI basket may not quickly capture this change.
To reduce this problem, several steps can be taken by makers of price indices:[1][2]