What Is the Substitution Effect of a Price Change

question 118

Multiple Choice

What is the substitution effect of a price change?

• A) Consumers will buy more of the good whose relative price has risen and less of the good whose relative price has fallen.
• B) When prices fall, consumers will have more purchasing power and buy more of the good whose price has fallen.
• C) When prices fall, consumers will have more purchasing power and buy more of all goods.
• D) Consumers will consume less of the good whose relative price has risen and more of the good whose relative price has fallen.

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