The substitution effect says that as the price of a good
A) rises, consumers substitute cheaper products for the good.
B) falls, consumers buy substitute goods.
C) rises, the purchasing power of income falls.
D) falls, consumers reduce the quantity demanded of that good.

Question

Quizplus · Accepted Answer

The substitution effect refers to the tendency of consumers to replace more expensive items with less costly alternatives when prices increase, maintaining their consumption levels by choosing cheaper options.

The Substitution Effect Says That as the Price of a Good