When the price of a product falls,causing consumers to purchase more of that product and less of other products,it is the:

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Quizplus · Accepted Answer

This is the substitution effect, where consumers substitute a lower-priced good for a higher-priced good, resulting in an increase in demand for the lower-priced good and a decrease in demand for the higher-priced good. The income effect refers to changes in purchasing power due to changes in income, the wealth effect refers to changes in purchasing power due to changes in asset values, and the interest rate effect refers to changes in borrowing and lending behavior due to changes in interest rates. None of these effects are directly related to changes in prices causing consumers to purchase more of a particular product.

When the Price of a Product Falls,causing Consumers to Purchase