-The above figure shows Bobby's indifference map for soda and juice.B₁ indicates his original budget line.B₂ indicates his budget line resulting from a decrease in the price of soda.What change in quantity best represents his substitution effect?

Question

-The above figure shows Bobby's indifference map for soda and juice.B<sub>1</sub> indicates his original budget line.B<sub>2</sub> indicates his budget line resulting from a decrease in the price of soda.What change in quantity best represents his substitution effect? A) 3 B) 10 C) 15 D) 7

Quizplus · Accepted Answer

The substitution effect is the change in quantity demanded when the price of a good changes, holding utility constant. In this case, the substitution effect is represented by the movement along the indifference curve due to the change in the price of soda, which is 3 units.

-The Above Figure Shows Bobby's Indifference Map for Soda and Juice.B1

-The Above Figure Shows Bobby's Indifference Map for Soda and Juice.B₁