If the price of orchids falls, the substitution effect due to the price change will cause
A)an increase in the demand for orchids.
B)an increase in the demand for roses, a substitute for orchids.
C)an increase in the quantity of orchids demanded.
D)an increase in the quantity of orchids supplied.

Question

Quizplus · Accepted Answer

If the price of orchids falls, the substitution effect due to the price change will lead consumers to substitute them for other more expensive goods, like roses. This would cause an increase in quantity demanded of orchids. However, it would not necessarily result in an increase in demand for orchids since the substitution effect would encourage consumers to purchase other substitute goods. The quantity supplied of orchids would not change as a result of the price change.

If the Price of Orchids Falls, the Substitution Effect Due