A consumer's switch to another similar good when the price of the preferred good increases is termed the:
A) income effect.
B) substitution effect.
C) utility effect.
D) marginal effect.

Question

Quizplus · Accepted Answer

The described behavior is the substitution effect. This occurs when a consumer switches to a substitute good when the price of their preferred good increases. The income effect refers to the change in purchasing power a consumer experiences due to a change in price, the utility effect has no clear definition in economics, and the marginal effect refers to the impact a small change in a variable has on the outcome.

A Consumer's Switch to Another Similar Good When the Price