ECONOMICS
SUPPLY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A
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B
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C
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D
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Detailed explanation-1: -Answer and Explanation: The correct option is c) The substitution effect. Substitutes are those goods that are similar and provide the consumers will the same satisfaction level on consumption. The substitution effect occurs when consumers in a market substitute goods for another depending on price.
Detailed explanation-2: -The substitution effect occurs when the price of a good falls, consumers will substitute it for other goods, which are now relatively more expensive.
Detailed explanation-3: -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-4: -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.