The _____ effect demonstrates that when the price of one good rises, consumers will adjust consumption toward lower-priced goods.
A) income
B) supply
C) substitution
D) marginal utility

Question

Quizplus · Accepted Answer

The substitution effect occurs when consumers react to an increase in a good's price by consuming less of that good and more of other goods. This behavior is driven by the desire to maintain their level of satisfaction or utility by finding a cheaper alternative that can substitute the more expensive item.

The _____ Effect Demonstrates That When the Price of One