Consuming more of a good that has become cheaper in place of a good that has become relatively more expensive is the:
A)income effect.
B)substitution effect.
C)budget constraint.
D)inferior effect.

Question

Quizplus · Accepted Answer

The situation described in the question is known as the substitution effect, which occurs when the consumer chooses to consume more of a good that has become relatively cheaper compared to another good. The income effect, on the other hand, describes the change in consumption due to a change in income. The budget constraint refers to the limit on how much a consumer can spend on goods and services, given their income and prices. The inferior effect refers to the decrease in demand for a good when a consumer's income increases and they can afford to purchase a better alternative.

Consuming More of a Good That Has Become Cheaper in Place