Amber enjoys a cup of coffee in the morning. When the price of her favorite brand increases, Amber switches to a cheaper brand. This is an example of the _____ effect.
A) income
B) utility
C) substitution
D) optimization

Question

Quizplus · Accepted Answer

When the price of Amber's favorite coffee brand increases and she switches to a cheaper brand, it demonstrates the substitution effect. This effect occurs when consumers replace a more expensive item with a less expensive alternative due to a change in relative prices, keeping their utility or satisfaction level constant.

Amber Enjoys a Cup of Coffee in the Morning