Which concept refers to economists failing to account for improvements in goods or services, incorrectly reporting higher inflation?

The concept being described is Quality Adjustment Bias. This bias arises due to the failure to adequately account for the improvements in the quality of goods and services over time. When measuring inflation using indices like the Consumer Price Index (CPI), economists aim to compare the prices of a fixed basket of goods and services from one period to the next. However, if the quality of a good or service improves—such as a smartphone having better features and performance compared to an older model—this enhancement may not be reflected in the price increase.

As a result, if economists do not adjust for these quality improvements, the inflation rate could be overestimated. This misreporting can lead to a skewed perception of inflation, making it appear higher than it truly is, since part of the perceived price increase is due to better quality rather than pure inflationary pressures. The concept is critical in ensuring that inflation measurements accurately reflect real economic conditions, avoiding misleading conclusions about economic performance.