Question

A fall in the price of a product might cause a household to shift its purchasing pattern away from substitutes toward that product.

This shift is​ called _____________.

Answer 1

The correct answer is: substitution effect.

Step-by-step explanation:

The price of a product is inversely related to the quantity demanded. This implies that an increase in the price will cause the quantity demanded to decrease and vice versa.

The consumers always prefer a cheaper substitute. So in case of a price rise of a product, the consumers will move to a substitute at lower price.

If there is a fall in the price of the product, the consumers will move away from the substitute to the product.

This is known as the substitution effect.