The price of cereal rises. As a result, people have cereal for breakfast on fewer days and eat eggs instead. This behavior is an example of

Question

Quizplus · Accepted Answer

The rise in the price of cereal leads people to substitute cereal with eggs for breakfast. This means that the quantity demanded of cereal decreases due to the substitution effect, which is captured in option D. Option A incorrectly refers to a decrease in the quantity supplied of cereal, which is a result of a change in the producer's behavior rather than the consumer's. Option B refers to an increase in the quantity demanded of eggs due to the income effect, which is irrelevant in this situation as the price of eggs has not changed. Option C is also incorrect, as there is no reason for the quantity supplied of eggs to increase in this situation - this is not an example of a supply-side response to the change in the demand for cereal.

The Price of Cereal Rises