If the price of a good falls and the consumer decides to buy more of the good solely because it is relatively less expensive, this describes the:
A) income effect.
B) substitution effect.
C) consumer surplus effect.
D) marginal maximizing rule.

Question

Quizplus · Accepted Answer

The scenario described is the substitution effect, where the cheaper price of the good makes it relatively more attractive compared to other goods, leading the consumer to substitute towards it. The income effect refers to changes in purchasing power due to changes in income, while consumer surplus effect and marginal maximizing rule are not applicable in this context.

If the Price of a Good Falls and the Consumer