When the price of Nike soccer balls fell, Ronaldo purchased more Nike soccer balls, and fewer Adidas soccer balls. Which of the following best explains Ronaldo's decision to buy more Nike soccer balls?

a. the substitution effectb. the income effectc. an increase in the demand for Nike soccer ballsd. the price effect

a. the substitution effect

Explanation:

In economics, substitutes are goods or services that are closely related and their use gives similar satisfaction to the consumer.

In this case Nike and Adidas balls are both balls that can perform the same function and give the same satisfaction. So when the price of Nike balls fall it is rational to spend less on them, since the higher priced Adidas balls gives same level of satisfaction.

So the substitution effect explains Ronaldo's decision.

a. the substitution effect

Explanation:

The Substitution Effect is the influence on consumption habits of a transition in the relative cost of goods. It is the economic ideology that, either as prices increase or income declines, people substitute cheaper options for a more expensive product.