Figure 21-23
-Refer to Figure 21-23. When the price of X is $80, the price of Y is $20, and the consumer's income is $160, the consumer's optimal choice is D. Then the price of X decreases to $20. The substitution effect can be illustrated as the movement from
A)D to E.
B)D to C.
C)C to E.
D)E to D.

Question

Figure 21-23 
-Refer to Figure 21-23. When the price of X is $80, the price of Y is $20, and the consumer's income is $160, the consumer's optimal choice is D. Then the price of X decreases to $20. The substitution effect can be illustrated as the movement from
A)D to E. 
B)D to C. 
C)C to E. 
D)E to D.

Quizplus · Accepted Answer

When the price of X decreases, the consumer will substitute X for Y. This leads to a movement along the indifference curve from D to C, which represents the substitution effect. Since the consumer still prefers bundle C to bundle E, the best choice remains D.

Figure 21-23 -Refer to Figure 21-23. When the Price of X Is