According to the substitution effect,which statement BEST describes why a decrease in the price of LED light bulbs leads to an increase in the quantity of LED light bulbs demanded?
A)Buyers have more real income.
B)Buyers always purchase fewer substitute goods for LED light bulbs.
C)Buyers tend to purchase more of the now less expensive LED light bulbs.
D)Buyers tend to purchase more complementary goods to LED light bulbs.

Question

Quizplus · Accepted Answer

The substitution effect states that as the price of a good decreases, buyers tend to purchase more of that good and less of its substitutes. In the case of LED light bulbs, a decrease in price makes them relatively less expensive compared to other types of light bulbs, so buyers are likely to purchase more LED bulbs and fewer of their substitutes. Therefore, choice C is the best answer. Choice A is incorrect because the substitution effect does not involve changes in real income. Choice B is incorrect because the substitution effect does not assume buyers always purchase fewer substitutes. Choice D is incorrect because the substitution effect does not involve changes in demand for complementary goods.

According to the Substitution Effect,which Statement BEST Describes Why a Decrease