Why does substitution bias arise if the inflation rate is calculated based on a fixed basket of goods?

Substitution bias arises in inflation calculations based on a fixed basket of goods because consumers tend to alter their purchasing behavior in response to price changes. When the price of a particular good rises, consumers may substitute it with a cheaper alternative, which the fixed basket does not account for. As a result, the inflation rate may overstate the true cost of living by not reflecting these changes in consumer behavior, leading to an inaccurate representation of economic conditions. This bias highlights the limitations of using a static basket to measure inflation in a dynamic market.