Figure 4.2
A consumer's original utility maximizing market basket of goods is shown in Figure 4.2 as point A. Following a price change, the consumer's utility maximizing market basket is at point B.
-Refer to Figure 4.2. The substitution effect on the quantity of clothing purchased is:

Question

Quizplus · Accepted Answer

The substitution effect is the change in quantity demanded due to a change in relative prices, holding utility constant. It is represented by the movement from the original consumption point (C1) to the new point on the same indifference curve (C2) after adjusting for the price change.

Figure 4.2 A Consumer's Original Utility Maximizing Market Basket of Goods Is