A major hotel chain found that if they were to reduce the cost of the ice cream they currently served they would be able to save over 400 employees jobs.Therefore,they switched from a high priced brand of ice cream to a more moderate priced ice cream.This is known as the:
A) substitution effect
B) income effect
C) brand effect
D) commercial effect
E) value effect

Question

Quizplus · Accepted Answer

The hotel chain's decision to switch to a more moderately priced ice cream to save jobs is an example of the substitution effect. The substitution effect occurs when consumers or businesses substitute a cheaper product for a more expensive one in order to save money. In this case, the hotel chain has substituted a more expensive brand of ice cream for a cheaper one, which allows them to save on costs and keep more employees.

A Major Hotel Chain Found That If They Were to Reduce