The substitution effect is unambiguous in its direction.

Question

Quizplus · Accepted Answer

The substitution effect always leads to a decrease in the quantity consumed of the relatively more expensive good and an increase in the quantity consumed of the relatively cheaper good. This direction is clear and unambiguous. The substitution effect always leads to a decrease in the quantity demanded of a good when its price increases, and an increase in quantity demanded when its price decreases. Therefore, the direction of the substitution effect is unambiguous.

The Substitution Effect Is Unambiguous in Its Direction