Question

A rise in the price of Pepsi that causes a household to shift its purchasing pattern toward Coke and away from Pepsi is the ________ effect of a price change. A) income B) substitution

Answer 1

Answer:Substitution ---B

Step-by-step explanation:

When goods are closely related together such that they both give similar purpose , they are called Substitute goods.

Therefore when any of the substitute goods prices rises, Consumers will go for the cheaper alternatives which will provide more value for thier money.

Here, the rise in the price of Pepsi caused consumers to shift to a cheaper alternative which is Coke. Other substitute goods that can have the Substitution effect include beef and chicken, butter and margarine etc