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

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As the price of cereal rises, people switch to a substitute good, in this case, eggs, which leads to a decrease in the quantity demanded of cereal. This is an example of the substitution effect. It is not an example of an increase in the quantity demanded of eggs due to the income effect, a decrease in the quantity supplied of cereal, or an increase in the quantity supplied of eggs due to the income effect.

The Price of Cereal Rises