According to the substitution effect, a decrease in the price of a product leads to an increase in the quantity demanded because buyers:
A) purchase more complementary goods.
B) purchase more substitute goods.
C) purchase fewer substitute goods.
D) have more real income.

Question

Quizplus · Accepted Answer

The substitution effect occurs when consumers react to a price decrease by purchasing more of the cheaper product and less of its substitutes, reflecting a shift in consumption patterns due to the relative price change, not a change in real income.

According to the Substitution Effect, a Decrease in the Price