There are many options available to consumers when it comes to breakfast cereals.So,if Kellogg's significantly increases the price of Rice Krispies,consumers are more apt to buy alternate cereals instead.This illustrates which concept?
A) the income effect
B) the substitution effect
C) the break-even point
D) the target return effect
E) cross-price elasticity

Question

Quizplus · Accepted Answer

The situation described in the question illustrates the substitution effect, which refers to consumers switching to alternatives when the price of a particular product increases. In this case, if Kellogg's increases the price of Rice Krispies, consumers will likely buy other cereal brands instead, indicating a substitution effect. The other options listed do not apply to this scenario. The income effect refers to changes in buying habits due to changes in income; the break-even point is the level of sales required to cover all costs and generate a profit; the target return effect is the goal of achieving a specific profit margin; and cross-price elasticity refers to the responsiveness of demand for one product to changes in the price of another related product.

There Are Many Options Available to Consumers When It Comes