Figure 21-8

-Refer to Figure 21-8.If the consumer is currently at point A in the figure,a movement to point B as a result of a decrease in the price of potato chips represents the
A)substitution effect.
B)income effect.
C)budget effect.
D)price effect.

Question

Figure 21-8
 
-Refer to Figure 21-8.If the consumer is currently at point A in the figure,a movement to point B as a result of a decrease in the price of potato chips represents the
A)substitution effect. 
B)income effect. 
C)budget effect. 
D)price effect.

Quizplus · Accepted Answer

A movement from point A to point B due to a decrease in price of potato chips represents the substitution effect, as the consumer switches from a relatively expensive alternative (alternative Y) to a relatively cheaper alternative (potato chips). The income effect relates to the change in purchasing power of the consumer due to a change in income, while the budget effect and price effect are not relevant in this scenario.

Figure 21-8 -Refer to Figure 21-8.If the Consumer Is Currently at Point