As a result of a decrease in the price of online streaming movies, consumers download more movies online and buy fewer DVDs. This is an illustration of:

Question

Quizplus · Accepted Answer

The scenario described here is an example of the substitution effect, as consumers switch from buying DVDs to downloading movies online due to the decrease in the price of online streaming. The income effect would apply if the decrease in price led to an increase in the overall demand for movies, but this is not explicitly stated. Consumer sovereignty and diminishing marginal utility are not relevant in this context.

As a Result of a Decrease in the Price of Online