The substitution effect always involves a change in consumption in the _____ direction as (to)the _____ change.
A)same;budget
B)same;price
C)opposite;price
D)opposite;budget

Question

Quizplus · Accepted Answer

The substitution effect occurs when a change in the relative prices of two goods leads to a consumer substituting one good for another. This substitution effect always involves a change in consumption in the opposite direction as the price change. For example, if the price of good X increases relative to the price of good Y, consumers will shift their consumption towards good Y, leading to a decrease in the quantity demanded of good X and an increase in the quantity demanded of good Y. This is why the answer is C - opposite direction as the price change.

The Substitution Effect Always Involves a Change in Consumption in the _____