If the price of video games falls, then the substitution effect will cause a consumer to reduce her consumption of video games.

Question

Quizplus · Accepted Answer

The substitution effect suggests that if the price of a good falls, a consumer will substitute it for other goods that were previously too expensive. Therefore, if the price of video games falls, the substitution effect would lead to an increase in consumption, not a reduction.

If the Price of Video Games Falls, Then the Substitution