-The substitution effect from a fall in the price of a gallon of gasoline is shown in the above figure by the movement from
A) point A to point C.
B) point A to point B.
C) point B to point C.
D) point A to point B and then to point C.

Question

-The substitution effect from a fall in the price of a gallon of gasoline is shown in the above figure by the movement from
A) point A to point C. 
B) point A to point B. 
C) point B to point C. 
D) point A to point B and then to point C.

Quizplus · Accepted Answer

The substitution effect is the change in consumption resulting from a change in the relative price of goods, holding utility constant. This is represented by the movement from point A to point B.

-The Substitution Effect from a Fall in the Price of a Gallon