Assume that a college student purchases only coffee and almonds.What will the substitution effect associated with a decrease in the price of almonds result in
A)an increase in the consumption of coffee only
B)a decrease in the consumption of coffee only
C)an increase in the consumption of almonds, and a decrease in the consumption of coffee
D)a decrease in the consumption of almonds, and an increase in the consumption of coffee

Question

Quizplus · Accepted Answer

The substitution effect occurs when a decrease in the price of almonds makes them relatively cheaper compared to coffee, leading the student to substitute almonds for coffee, increasing almond consumption and decreasing coffee consumption.

Assume That a College Student Purchases Only Coffee and Almonds