When price of a product falls, more of it is purchased because of
A)the substitution effect
B)the income effect
C)neither substitution effect nor income effect
D)both the substitution and income effects

Question

Quizplus · Accepted Answer

When the price of a product falls, both the substitution effect (consumers substitute the cheaper product for more expensive ones) and the income effect (consumers feel richer because their purchasing power increases) contribute to an increase in quantity demanded.

When Price of a Product Falls, More of It Is