Following a decrease in the price of a good or service,an individual will purchase more of the now less expensive good and less of other more expensive goods.This is known as the _____ effect.
A)income
B)endowment
C)substitution
D)price
E)scale

Question

Quizplus · Accepted Answer

This is known as the substitution effect, as the individual is substituting the now less expensive good for other more expensive goods. The income effect refers to the change in purchasing power due to changes in income, the endowment effect refers to the tendency for individuals to value goods they already possess more than they would if they did not possess them, the price effect is not a commonly used term in economics, and the scale effect refers to the impact of changes in production scale on profitability.

Following a Decrease in the Price of a Good or Service,an