For two goods which are perfect complements,the substitution effect of a price decrease is:

Question

Quizplus · Accepted Answer

For perfect complements, the goods must be consumed in fixed proportions, meaning that the consumer will always purchase a specific ratio of the two goods. Therefore, a decrease in the price of one good will not lead to any substitution effect as the consumer will still need to purchase the fixed ratio of both goods, regardless of the price change. Hence, the substitution effect is zero.

For Two Goods Which Are Perfect Complements,the Substitution Effect of a Price