Consider a consumer who purchases two goods, X and Y. If the price of good Y falls, then the substitution effect by itself will
A) cause the consumer to buy more of good Y and less of good X.
B) cause the consumer to buy more of good X and less of good Y.
C) not affect the amount of goods X and Y that the consumer buys.
D) result in an upward-sloping demand for good Y because of the substitution effect.

Question

Quizplus · Accepted Answer

When the price of good Y falls, the substitution effect will cause the consumer to buy more of good Y because it is relatively cheaper compared to good X, leading to a decrease in the quantity of good X purchased.

Consider a Consumer Who Purchases Two Goods, X and Y