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

-When a good becomes more expensive, it yields less satisfaction per dollar, so consumers buy less of it and more of other goods. This is called the _____ effect.
A)substitution
B)income
C)replacement
D)augmentation
E)disbursement

Question

The table below shows the total utility associated with various units of goods X and Y.Table 7.5
 
-When a good becomes more expensive, it yields less satisfaction per dollar, so consumers buy less of it and more of other goods. This is called the _____ effect.
A)substitution 
B)income 
C)replacement 
D)augmentation 
E)disbursement

Quizplus · Accepted Answer

When a good becomes more expensive, consumers will substitute to other goods to maintain their utility level. This is known as the substitution effect of price change. The income effect, on the other hand, refers to the change in consumption that results from a change in purchasing power due to a change in price of a good. The other options (replacement, augmentation, and disbursement) are not relevant to the concept being described.

The Table Below Shows the Total Utility Associated with Various