The substitution effect is
A)the change in quantity demanded that occurs when one good is substituted for another.
B)the change in quantity demanded that occurs as a result of a change in absolute prices,with real income held constant.
C)the change in quantity demanded that occurs as a result of a change in relative prices with money income held constant.
D)the change in quantity demanded that occurs as a result of a change in relative prices with real income held constant.
E)the change in the relative prices of two or more goods.

Question

Quizplus · Accepted Answer

The substitution effect is the change in quantity demanded that occurs as a result of a change in relative prices with real income held constant. This means that as the price of one good increases relative to another, consumers will substitute the more expensive good with the less expensive one. The change in quantity demanded due to this substitution is known as the substitution effect.

The Substitution Effect Is