refer to the following figure:
The consumer's income is $2,600.
-The substitution effect of the increase in the price of X is (approximately)
A) X rises 20 units.
B) X falls 40 units.
C) X falls 130 units.
D) X falls 16 units.
E) X rises 40 units.

Question

refer to the following figure:
  The consumer's income is $2,600.
-The substitution effect of the increase in the price of X is (approximately)
A) X rises 20 units. 
B) X falls 40 units. 
C) X falls 130 units. 
D) X falls 16 units. 
E) X rises 40 units.

Quizplus · Accepted Answer

The substitution effect, in economic terms, refers to how consumers will substitute a more expensive good for a cheaper one when the price of the former increases. Therefore, if the price of good X increases, consumers will buy less of it, indicating that the quantity of X will fall, not rise. Among the provided options, "X falls 40 units" is the correct choice that aligns with the substitution effect's impact on consumer behavior.

Refer to the Following Figure