alleryStart learning →Under the substitution effect, consumers consume more of the good that is:
ASold in smaller packs
BBought least often
CRelatively lower priced
DRelatively higher priced
Answer & Solution
Correct answer: C. Relatively lower priced
1. The substitution effect works in both directions at once.
2. A price change gives an incentive to consume less of the relatively higher priced good.
3. It also gives an incentive to consume more of the good with a relatively lower price.
4. Consumers substitute toward whatever has become comparatively cheap.
_Source: OpenStax Principles of Microeconomics for AP Courses 2e (CC BY 4.0), Ch 6 'Consumer Choices'_
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