In general,the substitution effect of an increase in the price of a normal good:
A) will cause the individual to buy more of that good because they have relatively more income.
B) will cause the individual to buy less of that good because they have relatively less income.
C) will cause the individual to buy more of that good and less of others because it is relatively less expensive.
D) will cause the individual to buy less of that good and more of others because it is relatively more expensive.

Question

Quizplus · Accepted Answer

The substitution effect occurs when the price of a good increases and consumers switch to buying substitute goods that are now relatively cheaper. Therefore, the individual will buy less of that good and more of substitutes, which are relatively cheaper.

In General,the Substitution Effect of an Increase in the Price