The larger the substitution effect the _______ the absolute value of the price elasticity of demand.
A) smaller
B) greater
C) greater the change in
D) less the change in

Question

Quizplus · Accepted Answer

The substitution effect is the degree to which consumers switch to a substitute product when the price of a good or service changes. When the substitution effect is strong, consumers are highly responsive to changes in price, resulting in a greater change in quantity demanded. This means that the absolute value of the price elasticity of demand is greater. Therefore, the larger the substitution effect, the greater the absolute value of the price elasticity of demand.

The Larger the Substitution Effect the _______ the Absolute Value