When price rises,the substitution effect
A)always increases consumption.
B)increases consumption for normal goods only.
C)decreases consumption for normal goods only.
D)decreases consumption for inferior goods only.
E)does none of the above.

Question

Quizplus · Accepted Answer

The substitution effect, when the price of a good rises, generally leads to a decrease in the consumption of that good as consumers switch to cheaper alternatives, regardless of whether the good is normal or inferior. This effect does not specifically increase or decrease consumption based on the classification of goods as normal or inferior.

When Price Rises,the Substitution Effect