Which Statement Best Explains the Substitution Effect of a Price

question 20

Multiple Choice

Which statement best explains the substitution effect of a price change?  

• A) It is caused by a change in relative prices. 
• B) It affects the consumer's ability, rather than willingness, to purchase a good. 
• C) It assumes that the consumer substitutes more expensive goods for cheaper ones when income increases. 
• D) It may cause the consumer to buy less of the good when its price falls.

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Definitions:

Expectancy

The anticipation or belief about the likelihood of an event occurring in the future.

Perceived Relationship

The subjective understanding or interpretation of the nature, quality, and dynamics of a connection between entities.

Expectancy Model

A psychological theory that explains motivation as a process where individuals evaluate the likelihood that their efforts will lead to desired outcomes.

Technical Skills

Specific abilities or knowledge related to particular tasks, technologies, or fields of work.