The substitution effect is the change in consumption that results when a price change moves the consumer along the same indifference curve.

Question

Quizplus · Accepted Answer

The statement is true. The substitution effect occurs when a change in the price of a good or service causes the consumer to switch to a substitute product. This results in a movement along the same indifference curve, as the consumer is still achieving the same level of utility.

The Substitution Effect Is the Change in Consumption That Results