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8 December, 09:27

when the price of a product rises, consumer shift their purchases to other product whose prices are now relatively lower. This statement describes:

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  1. 8 December, 10:44
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    The substitution effect

    Explanation:

    The substitution effect arises when there is a increase (decrease) in demand for a good as a result of a fall (rise) respectively in price of the good in terms of other substitute goods.

    For example, if the price of chicken rises, consumers may reduce their demand for chicken and resort to cheaper alternatives such as beef. This is known as the substitution effect.
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