Figure 21-7

-Refer to Figure 21-7.If the consumer is currently at point A,what effect is represented by a movement to point B as a result of a decrease in the price of potato chips
A)the substitution effect
B)the income effect
C)the budget effect
D)the price effect

Question

Figure 21-7
 
-Refer to Figure 21-7.If the consumer is currently at point A,what effect is represented by a movement to point B as a result of a decrease in the price of potato chips
A)the substitution effect 
B)the income effect 
C)the budget effect 
D)the price effect

Quizplus · Accepted Answer

The substitution effect occurs when a decrease in the price of potato chips makes them relatively cheaper compared to other goods, leading the consumer to substitute potato chips for other goods, thus moving from point A to point B.

Figure 21-7 -Refer to Figure 21-7.If the Consumer Is Currently at Point