An increase in the consumption of a good resulting from a reduction in price that makes the good cheaper in relation to other goods is called the
A) substitution effect.
B) income effect.
C) real balance effect.
D) inelasticity effect.

Question

Quizplus · Accepted Answer

The substitution effect occurs when a decrease in the price of a good makes it relatively cheaper compared to other goods, leading consumers to substitute the cheaper good for more expensive alternatives.

An Increase in the Consumption of a Good Resulting from a Reduction