When a consumer buys more of a good as a result of a relative price change,economists call it
A) diminishing marginal utility.
B) the substitution effect.
C) marginal utility.
D) the real-income effect.
E) the consumer optimum.

Question

Quizplus · Accepted Answer

The substitution effect occurs when consumers react to a change in the price of a good by consuming more of that good and less of a higher-priced alternative, or vice versa, purely because of the change in relative price, holding the real income or purchasing power constant.

When a Consumer Buys More of a Good as a Result