When the price of a resource increases, thereby causing the price of the final product to rise, consumers will purchase less of the final product. This is called the
A) substitution in production effect.
B) substitution in consumption effect.
C) elasticity effect.
D) inelasticity effect.

Question

Quizplus · Accepted Answer

The situation described is known as the substitution in consumption effect, where consumers switch to cheaper alternatives or reduce their overall consumption of the product due to the price increase of a resource involved in production.

When the Price of a Resource Increases, Thereby Causing the Price