According to the Substitution Effect, an Increase in the Price

question 31

Multiple Choice

According to the substitution effect, an increase in the price of oranges will:

• A)​cause consumers to consume fewer apples because more money is spent on oranges.
• B)​cause consumers to spend more on oranges because a higher price signals that oranges are better than apples.
• C)​cause consumers to replace some oranges with other fruit that is now relatively cheaper than oranges.
• D)​leave consumers with less money to spend on all goods.

---

Definitions:

Tariffs

Taxes imposed on imported goods to regulate trade, protect domestic industries, or generate revenue for the government.

Imports

are goods and services brought into one country from another for trade or sale.

Foreign Direct Investment

Investment made by a company or individual in one country in business interests in another country, in the form of establishing business operations or acquiring business assets.

Ownership

The act of having legal or rightful title to something, such as property, or feeling responsibility for an outcome or process in an organization.