Respuesta :
Answer:
The correct answer is: the substitution effect.
Explanation:
The price of a product is inversely related to the quantity demanded. An increase in the price of the product decreases the purchasing power of the consumer.
So in case of a price rise, the consumers move to a product at a lower price. In other words, the consumers substitute a good at lower price.
The income and substitution effect causes the demand curve to be downward sloping.
Answer:
SUBSTITUTION EFFECT
Explanation:
Substitution Effect is the effect refering to change in consumption pattern due to change in relative prices .
Generally , it means that consumers SUBSTITUTE / replace dearer (expensive) goods by cheaper ones .
This can be explained as per relative comparison of their ratios .
Good A price = 5 , Good B price = 10 Good B = 2 Good A
Good A Price falls to = 2 , Good B price = 10 Good B = 5 Good A
EG : So , as per the effect , consumer tends to replace Good B (expensive) by Good A
(cheap)
This effect is a part of : Price - Demand 'Law of Demand Effect'
= Income Effect + Substition Effect
(former meaning- change in consumption due to change in real income / purchasing
power because of change in price)
