The table below shows the total utility associated with various units of goods X and Y.Table 7.5

-Following a decrease in the price of a good, an individual will purchase more of the now less expensive good and less of other more expensive goods. This is known as the _____ effect.
A)income
B)endowment
C)substitution
D)price
E)scale

Question

The table below shows the total utility associated with various units of goods X and Y.Table 7.5
 
-Following a decrease in the price of a good, an individual will purchase more of the now less expensive good and less of other more expensive goods. This is known as the _____ effect.
A)income 
B)endowment 
C)substitution 
D)price 
E)scale

Quizplus · Accepted Answer

The given scenario describes the substitution effect, where an individual substitutes the now cheaper good for other more expensive goods, leading to a change in the relative prices of goods and a change in the quantity demanded of each good. The income effect, on the other hand, refers to the change in the quantity demanded due to a change in real income caused by a change in price. Endowment effect, price effect and scale effect are not relevant in this context.

The Table Below Shows the Total Utility Associated with Various