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

Question

Quizplus · Accepted Answer

The substitution effect refers to the change in quantity demanded due to a change in relative prices, with real income held constant, as consumers substitute cheaper goods for more expensive ones.

The Substitution Effect Is the Change in Quantity Demanded That