The substitution effect of a decrease in the price of movie tickets results in
A) an increase in the quantity demanded of movie tickets.
B) a decrease in the quantity demanded of movie tickets.
C) an increase in the demand for movie tickets.
D) a decrease in the demand for movie tickets.

Question

Quizplus · Accepted Answer

The substitution effect states that as the price of a good decreases, consumers will substitute it for other goods that they previously purchased instead. In this case, as the price of movie tickets decreases, consumers may choose to go to the movies instead of staying at home and watching TV, for example. This leads to an increase in the quantity demanded of movie tickets.

The Substitution Effect of a Decrease in the Price of Movie