ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The substitution effect states that when the price of a good decreases, consumers will substitute away from goods that are relatively more expensive to the cheaper good.

Detailed explanation-2: -The substitution effect refers to the change in demand for a good as a result of a change in the relative price of the good compared to that of other substitute goods. For example, when the price of a good rises, it becomes more expensive relative to other goods in the market.

Detailed explanation-3: -An increase in the number of available substitutes for a commodity will decrease the price elasticity of demand for the commodity. The long-run price elasticity of demand for a commodity is generally greater then the short-run price elasticity of demand for the commodity.

Detailed explanation-4: -If the price decreases, quantity demanded increases. This is the Law of Demand. On a graph, an inverse relationship is represented by a downward sloping line from left to right.