Which effect of a price change moves the consumer along the same indifference curve to a point with a new marginal rate of substitution?
A)the budget effect
B)the preference effect
C)the substitution effect
D)the income effect

Question

Quizplus · Accepted Answer

The substitution effect is the effect of a price change that moves the consumer along the same indifference curve to a point with a new marginal rate of substitution, meaning that the consumer is substituting one good for another to maintain the same level of satisfaction, given the new prices. The budget effect refers to the change in purchasing power due to a change in price, while the preference effect and income effect are not relevant to this scenario.

Which Effect of a Price Change Moves the Consumer Along