Use the following to answer questions:
Figure: Music and Movie Downloads 5
-(Figure: Music and Movie Downloads 5) Refer to the figure. The consumer in this diagram is initially optimizing consumption at point A than moves to point B. The substitution effect of the price change causes the consumer to:
A) reduce the number of music downloads by 3.
B) reduce the number of music downloads by 4.
C) increase the number of music downloads by 1.
D) increase the number of music downloads by 3.

Question

Use the following to answer questions:
Figure: Music and Movie Downloads 5 
-(Figure: Music and Movie Downloads 5) Refer to the figure. The consumer in this diagram is initially optimizing consumption at point A than moves to point B. The substitution effect of the price change causes the consumer to:
A) reduce the number of music downloads by 3. 
B) reduce the number of music downloads by 4. 
C) increase the number of music downloads by 1. 
D) increase the number of music downloads by 3.

Quizplus · Accepted Answer

The substitution effect typically causes consumers to substitute away from the good that has become relatively more expensive. If the consumer reduces the number of music downloads by 3, it indicates they are substituting towards the other good.

Use the Following to Answer Questions