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Jennifer's two favorite flavors of soda are cola and lemon-lime. On a normal week, Jennifer bought 3 cola
sodas and 3 lemon-lime sodas. After the price of cola soda increases, Jennifer buys only 2 cola sodas and
2 lemon-lime sodas in a week. This can be explained by

Respuesta :

daylaindanial29
I got 2 that’s what I got
Tundexi

This scenario can be best explained by the substitution effect & income effect

For the fact that the consumer consumes 2 goods lime soda and cola soda. Suppose the price of cola soda rises, the good is relatively more expensive than alternative goods,

  • Therefore, people will switch to other goods which are now relatively cheaper.

  • This explains that increase in price reduces the disposable income and this lower income may reduce demand.

In conclusion, the scenario can be best explained by the substitution effect & income effect

Read more about substitution effect:

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