Asked by Tonya Trisko on May 12, 2024
Verified
The reason the substitution effect works to encourage a consumer to buy less of a product when its price increases is that
A) the real income of the consumer has been increased.
B) the real income of the consumer has been decreased.
C) the product is now relatively more expensive than it was before.
D) other products are now relatively more expensive than they were before.
Substitution Effect
The change in the quantity demanded of a good that results from a change in price, making the good more or less expensive relative to other goods.
Consumer Behavior
The study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs.
- Explore the repercussions of price fluctuations on the demanded quantity through the mechanisms of income and substitution effects.
Verified Answer
GM
gandharv madaanMay 17, 2024
Final Answer :
C
Explanation :
The substitution effect occurs because when the price of a product increases, it becomes relatively more expensive compared to other goods, leading consumers to substitute it with cheaper alternatives.
Learning Objectives
- Explore the repercussions of price fluctuations on the demanded quantity through the mechanisms of income and substitution effects.