If the price of apples falls, the substitution effect will cause a consumer to reduce her consumption of apples.

Question

Quizplus · Accepted Answer

When the price of apples falls, the substitution effect should cause a consumer to increase her consumption of apples because they have become relatively cheaper compared to other goods. The income effect may cause a reduction in consumption if the consumer's purchasing power decreases due to a decline in income from selling apples, but this depends on the specific circumstances.

If the Price of Apples Falls, the Substitution Effect Will