Asked by
elena guardo
on Oct 25, 2024
Verified
The response to a change in the relative prices of goods is called:
A) the income effect.
B) the substitution effect.
C) the wealth effect.
D) the price effect.
Substitution Effect
The change in consumption patterns due to a change in the relative prices of goods, leading consumers to substitute one good for another.
Relative Prices
The price of one good or service compared to another, often used to indicate the value or cost-effectiveness between different items.
- Execute the ideas of substitution and income effects within appropriate contexts.
Verified Answer
MS
Learning Objectives
- Execute the ideas of substitution and income effects within appropriate contexts.