The substitution effect
A) is always larger than the price effect.
B) always decreases purchases of a good as the price of a good rises.
C) increases purchases of the good as the price rises if the good is a normal good.
D) is always smaller than the income effect.

Question

Quizplus · Accepted Answer

The substitution effect always decreases the quantity demanded of a good when its price rises, as consumers switch to relatively cheaper alternatives.

The Substitution Effect