In 2012 Nike reduced the price of its running shoes by 20 percent. As a result, the substitution effect caused

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Quizplus · Accepted Answer

The substitution effect occurs when consumers switch their purchasing preferences to a cheaper alternative when the price of a good decreases. In this case, when Nike reduced the price of its running shoes, consumers would be more likely to switch from buying other brands, such as Adidas, to buying Nikes because Nikes became relatively cheaper.

In 2012 Nike Reduced the Price of Its Running Shoes