The effect of a change in price on the quantity bought while keeping the consumer on the same indifference curve, is called the
A) price effect.
B) income effect.
C) substitution effect.
D) real effect.

Question

Quizplus · Accepted Answer

The effect of a change in price on the quantity bought while keeping the consumer on the same indifference curve is called the substitution effect. This effect measures the change in the quantity bought resulting from a change in the relative price of one good compared to another, assuming that the consumer's level of satisfaction or utility remains constant. This effect is usually negative, meaning that as the price of a good rises relative to other goods, consumers will substitute away from that good towards cheaper alternatives.

The Effect of a Change in Price on the Quantity