alleryStart learning →The substitution effect occurs when a price change gives consumers an incentive to consume less of the good that is:
ASold in larger packs
BRelatively higher priced
CRelatively lower priced
DBought most frequently
Answer & Solution
Correct answer: B. Relatively higher priced
1. A price change shifts consumption between goods.
2. The substitution effect occurs when a price changes.
3. Consumers then have an incentive to consume less of the good with a relatively higher price.
4. They consume more of the good with a relatively lower price.
_Source: OpenStax Principles of Microeconomics for AP Courses 2e (CC BY 4.0), Ch 6 'Consumer Choices'_
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