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Which Statement Best Explains the Substitution Effect of a Price

Question 16

Multiple Choice

Which statement best explains the substitution effect of a price change?  


A)  It is caused by a change in relative prices. 
B)  It affects the consumer's ability, rather than willingness, to purchase a good. 
C)  It assumes that the consumer substitutes more expensive goods for cheaper ones when income increases. 
D)  It may cause the consumer to buy less of the good when its price falls.

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