The Substitution Effect of an Increase in the Price of Raisin

question 1

Multiple Choice

The substitution effect of an increase in the price of Raisin Bran refers to

• A) the decrease in the demand for Raisin Bran when its price rises.
• B) the result that consumers will now switch to a substitute good such as Cheerios, and the demand curve for Raisin Bran shifts to the left.
• C) the fact that the higher price of Raisin Bran lowers consumer's purchasing power, holding money income constant.
• D) the fact that the higher price of Raisin Bran relative to its substitutes, such as Cheerios, cause consumers to buy less Raisin Bran.