-Refer to Figure 6.1.The substitution effect is shown by the movement
A) From bundle A to bundle C
B) From bundle A to bundle B
C) From bundle B to bundle C
D) From bundle C to bundle B

Question

-Refer to Figure 6.1.The substitution effect is shown by the movement
A) From bundle A to bundle C 
B) From bundle A to bundle B 
C) From bundle B to bundle C 
D) From bundle C to bundle B

Quizplus · Accepted Answer

The substitution effect is the change in consumption resulting from a change in the relative prices of goods, holding the consumer's utility constant. This is typically represented by the movement from the original bundle (A) to the new bundle (C) on the same indifference curve after adjusting for the price change.