A change in consumption of a good associated with a change in its price, with the level of utility held constant, is referred to as:

Question

Quizplus · Accepted Answer

The change in consumption of a good associated with a change in its price, with the level of utility held constant, is referred to as the substitution effect. This is because consumers will substitute other goods for the good that has become relatively more expensive. The income effect refers to the change in consumption of a good associated with a change in purchasing power, and the wealth effect refers to the change in consumption of a good associated with a change in overall wealth. The total effect of a price change is the sum of both the substitution and income effects.

A Change in Consumption of a Good Associated with a Change