Assume that a college student purchases only coffee and Snickers bars.The substitution effect associated with a decrease in the price of a Snickers bar will result in
A) an increase in the consumption of coffee only.
B) a decrease in the consumption of coffee only.
C) an increase in the consumption of Snickers bars and a decrease in the consumption of coffee.
D) a decrease in the consumption of Snickers bars and an increase in the consumption of coffee.

Question

Quizplus · Accepted Answer

The substitution effect implies that as the price of Snickers bars decreases, they become relatively cheaper compared to coffee, leading the student to substitute Snickers bars for coffee, increasing Snickers consumption and decreasing coffee consumption.

Assume That a College Student Purchases Only Coffee and Snickers