When isolating the substitution effect of a change in an individual's budget constraint,_____ is held constant.
A)utility
B)budget
C)income
D)consumption

Question

Quizplus · Accepted Answer

The substitution effect focuses on the change in consumption due to a change in the relative prices of goods. To isolate this effect, we need to hold constant the individual's level of utility, preferences, and total income. Therefore, only the budget constraint, which reflects the prices and quantities of goods available to the individual, should be varied while income is held constant.

When Isolating the Substitution Effect of a Change in an Individual's