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

Practice Next

More The Management Basics Questions

What is the concept of the "natural rate of unemployment" in relation to the Phillips curve?

The Reserve Bank of India (RBI) proposed a four-year road map starting 2025-26 for regulated entities (REs) to disclose climate-related financial risks und...

Refer the below details and answer question Calculate the Capital Gearing Ratio

XYZ Ltd. purchased an asset on 1st January, 20X0, for 1,00,000 and the asset had an estimated useful life of ten years and a residual value of nil. The com...

When can interest realized on NPAs be taken to the income account?

How many financial centres were researched for the Global Financial Centres Index (GFCI) 33 edition?

Mentoring is a relationship between two people with the goal of professional and personal development. The person with whom the knowledge, experience, and ...

According to Regulation 18(6)(b) of the InvIT Regulations, what percentage of Net Distributable Cash Flows (NDCFs) must be distributed to unitholders?

The Ministry of Agriculture and Farmers’ Welfare, along with NABARD, recently launched a web portal to streamline and expedite the process of settling inte...

When employees exhibit control and restraint over himself/herself in difficult or adverse situations, it depicts which of the following characteristics?

Hey! Ask a query

Please enter email id The email must be a valid email address.

Please enter Mobile Number Please enter valid Mobile Number

Please enter your Doubt

Thank You for posting your query. Please check your email for further guidance.

Please Register/Login

Login or create an account to download this question.

Login Register

🎓

Think You're Ready for RBI Grade B?
RBI Grade B 2026 Phase 1 Memory Based Paper

200 Questions with Detailed Solutions

Section-wise Coverage (GA, English, Quant & Reasoning)

Download Now 100% Free PDF