This morning, Yoriko Dazai learned that the price of clams had dropped overnight while the price of mussels and her income stayed constant.Assuming that she must maintain the same level of utility, an increase in Yoriko's quantity demanded of clams would be caused by
A)the income effect
B)the law of supply
C)the substitution effect
D)a perfectly elastic demand curve
E)clams being an inferior good

Question

Quizplus · Accepted Answer

The decrease in the price of clams makes them relatively cheaper compared to mussels. The substitution effect states that when the price of one good falls while the price of another good stays constant, consumers will tend to substitute the cheaper good for the more expensive one. Therefore, Yoriko's increase in quantity demanded of clams would be caused by the substitution effect. The income effect refers to the change in quantity demanded of a good due to a change in income, which is not relevant in this scenario. The law of supply and the elasticity of demand do not explain Yoriko's change in quantity demanded in this situation. The fact that clams may be an inferior good does not necessarily determine Yoriko's behavior in this case.

This Morning, Yoriko Dazai Learned That the Price of Clams