A fall in the price of 7-UP that causes a household to shift its purchasing pattern away from Sprite and toward 7-UP is the ________ effect of a price change.
A) income
B) substitution
C) complementary
D) diminishing marginal utility

Question

Quizplus · Accepted Answer

This is known as the substitution effect, where a consumer chooses a cheaper alternative (7-UP) over a more expensive option (Sprite) when the price of the cheaper alternative decreases, holding the utility constant.

A Fall in the Price of 7-UP That Causes a Household