The Substitution Effect Argues That a Consumer

question 278

Multiple Choice

The substitution effect argues that a consumer

• A) will always use the additional purchasing power from a price decrease to purchase more of both goods.
• B) will not purchase more of a good when its price falls.
• C) will purchase more of a good that has become relatively cheaper, and less of a good that has become relatively more expensive.
• D) will purchase less of both goods if his or her real income increases.