What is true of the substitution effect on an increase in the price of a normal good?

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1223569

2026-03-19 05:30

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When the price of a normal good increases, the substitution effect leads consumers to seek alternative goods that are relatively cheaper. This shift occurs because consumers will substitute the more expensive good with other products that fulfill similar needs or desires. As a result, the quantity demanded for the normal good decreases, as individuals adjust their consumption patterns in response to the higher price. Overall, the substitution effect reinforces the negative relationship between price and quantity demanded for normal goods.

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