ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The substitution effect occurs when consumers react to an increase in a good’s price by consuming less of that good and more of other goods.

Detailed explanation-2: -The substitution effect may occur when, due to a change in relative prices and finances, a consumer replaces one product with another. That might mean switching out cheaper or moderately priced items for ones that are more expensive.

Detailed explanation-3: -The substitution effect refers to the idea that consumers react to a rise in the price of one good by consuming less of a substitute good. With this effect, consumers choose between two substitute products depending on their competing price.

Detailed explanation-4: -law of demand. that consumers buy more of a good when its price decreases and less when its price increases.

Detailed explanation-5: -The higher price causes consumers to substitute more of other goods, whose prices are now relatively lower. The substitution effect thus reduces the quantity demanded. The higher price also reduces purchasing power, causing consumers to reduce consumption of the good via the income effect.