Jeff likes Pepsi and pizza. When the price of pizza rises, the substitution effect causes Pepsi to be relatively
A) more expensive, so Jeff buys more Pepsi.
B) more expensive, so Jeff buys less Pepsi.
C) less expensive, so Jeff buys more Pepsi.
D) less expensive, so Jeff buys less Pepsi.

Question

Quizplus · Accepted Answer

When the price of pizza rises, the substitution effect makes Pepsi relatively less expensive compared to pizza, leading Jeff to buy more Pepsi as a substitute.

Jeff Likes Pepsi and Pizza