Exhibit A

-Refer to Exhibit A. Suppose that the consumer must choose between buying socks and belts. Also, suppose that the consumer's income is R1 000. Suppose that the price of a pair of socks falls from R50 to R20. The substitution effect is represented by the movement from point?

Question

Exhibit A

-Refer to Exhibit A. Suppose that the consumer must choose between buying socks and belts. Also, suppose that the consumer's income is R1 000. Suppose that the price of a pair of socks falls from R50 to R20. The substitution effect is represented by the movement from point?

Quizplus · Accepted Answer

The substitution effect is the change in consumption resulting from a change in the relative price of goods, holding the consumer's utility constant. It is represented by the movement from the original consumption point (Z) to the new consumption point (X) after the price change, but before any change in real income is considered.

Exhibit a -Refer to Exhibit A. Suppose That the Consumer Must Choose