If the price of grapefruit rises, the substitution effect due to the price change will cause
A) a decrease in the demand for grapefruit.
B) a decrease in the demand for oranges, a substitute for grapefruit.
C) a decrease in the quantity demanded of grapefruit.
D) a decrease in the quantity supplied of grapefruit.

Question

Quizplus · Accepted Answer

The substitution effect suggests that consumers will switch from grapefruit to a cheaper substitute if the price of grapefruit increases. This means that the quantity demanded of grapefruit will decrease, as consumers buy less grapefruit and more of the substitute. However, there is no reason to believe that the demand for grapefruit as a whole will decrease, or that the price change will affect the supply of grapefruit.

If the Price of Grapefruit Rises, the Substitution Effect Due