Dillon is undecided about whether to eat at a restaurant or to order pizza at home. He then obtains a coupon for 10 percent off at the restaurant and decides to go there to eat. This is an example of
A) someone using criteria other than price to make a consumption decision.
B) a lower price leading a consumer to substitute more of the less expensive good for the relatively more expensive good.
C) a lower price leading a consumer to buy more of a good because of the income effect.
D) a consumer making a decision irrationally.

Question

Quizplus · Accepted Answer

The coupon offering 10 percent off at the restaurant effectively lowers the price of eating there compared to the cost of ordering pizza at home, leading Dillon to substitute the less expensive option (eating at the restaurant with a discount) for the more expensive one (ordering pizza at home). This is a classic example of the substitution effect in economics.

Dillon Is Undecided About Whether to Eat at a Restaurant