Difference between revisions of "Substitution effect"
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Central to the concept of the substitution effect is a downward slowing [[demand curve]] (i.e., lower price means greater demand) and the existence of [[substitute goods]]. | Central to the concept of the substitution effect is a downward slowing [[demand curve]] (i.e., lower price means greater demand) and the existence of [[substitute goods]]. | ||
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Revision as of 18:04, April 2, 2007
The substitution effect consists of consumers choosing to buy a different good based on a better price. For example, a decrease in the price of chicken may cause consumers to buy it instead of beef.
Central to the concept of the substitution effect is a downward slowing demand curve (i.e., lower price means greater demand) and the existence of substitute goods.