As the Relative Price of a Good Falls, the Substitution

question 224

Multiple Choice

As the relative price of a good falls, the substitution effect implies that people buy

• A) less of that good and more of its substitutes.
• B) more of that good and less of its substitutes.
• C) less of that good and less of its substitutes.
• D) more of that good and more of its substitutes.

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Definitions:

Quantity Supplied

The total amount of a good that sellers are willing to sell at a given price over a specified period.

Equilibrium Price

The price at which the quantity of goods supplied is equal to the quantity of goods demanded.

Demand

The quantity of a particular good or service that consumers are willing and able to purchase at various prices during a given period of time.