The Substitution Effect of an Increase in the Price of Peaches

question 3

Multiple Choice

The substitution effect of an increase in the price of peaches is

• A) the change in the quantity demanded that results from a change in the price of peaches making peaches more expensive relative to other goods, holding constant the effect of the price change on consumer purchasing power.
• B) the change in the demand for nectarines (a substitute good) that results when peaches become more expensive relative to nectarines, holding constant the effect of the price change on consumer purchasing power.
• C) the change in the quantity demanded of peaches that results from the effect of the change in the price of peaches on the consumer's purchasing power.
• D) the change in the demand for peaches that results when the price of peaches increases.

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Definitions:

Imbalance

A state of lack of equilibrium or proportion, in physical contexts, emotional states, or relationships.

Self-Handicapping

A strategy where individuals create obstacles to their own success to protect self-esteem in case of failure.

Elaboration Likelihood Model

A theory in social psychology that explains different ways of processing stimuli, why they are used, and their outcomes on attitude change.

Dissonance Theory

A theory that suggests people are motivated to reduce the discomfort (dissonance) caused by inconsistencies between their beliefs and their actions.