which of the following is true concerning the substitution effect of a decrease in price?
Which of the following is true concerning the substitution effect of a decrease in price?
Answer:
When the price of a good decreases, the substitution effect refers to the tendency of consumers to buy more of that good and less of other goods that are now relatively more expensive in comparison. As a result of the decrease in price, consumers perceive the good as a better value or substitute for the previously consumed alternatives. This leads to a shift in their consumption patterns towards the now less expensive product. The substitution effect highlights how consumers adjust their purchasing behavior in response to changes in relative prices, aiming to maximize their utility or satisfaction from the available choices.