Question

The substitution effect under the law of demand refers to which of the following situations?

Q: Answer-The substitution effect under the law of demand refers to which of the following situations?

The Law of Demand works primarily because when the price of a good decreases Substitution effect Consumers switch from relatively expensive goods to the cheaper one. The substitution effect occurs when the price of a good increases , making it relatively more expensive compared to its substitutes , leading consumers to shift consumption to cheaper alternatives . This contributes to the inverse relationship between price and quantity demanded Income effect The lower price increases real purchasing power, allowing consumers to buy more. These two effects together explain why demand increases when price falls.

A Consumers buy more of a good when their income increases

B Consumers switch to a cheaper alternative when the price of a good rises

C Consumers buy less of a good when prices remain constant

D Consumers purchase a good regardless of price changes

E Consumers continue buying luxury goods even after price increases

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