Final answer:
The substitution effect is True; it predicts changes in quantity demanded when the price of a good changes. Consumers seek substitutes for more expensive goods, maximizing their total utility within their budget constraint. This alters the compensated demand curve reflecting these consumer choices.
Step-by-step explanation:
The statement that the substitution effect ensures that any time there is a change in the price of a good, the quantity demanded along a compensated demand curve also changes, is True. The substitution effect occurs when a change in price causes consumers to replace more expensive items with less expensive ones. In essence, when the price of a good increases, consumers tend to buy less of that good and more of a cheaper substitute, and vice versa. This effect happens alongside the income effect, which reflects changes in consumption based on increased or decreased purchasing power following a price change. For example, if plane tickets become cheaper, the substitution effect predicts that consumers will buy more plane tickets instead of train tickets. Consequently, a change in the quantity demanded is observed on the compensated demand curve, which accounts for these price-induced changes in consumption.
The key to understanding the substitution effect is recognizing that it reflects a consumer's tendency to maintain maximum total utility, which is the total satisfaction derived from their choices. The substitution curve helps illustrate how consumers make trade-offs when faced with different prices, aiming to maximize their total utility under the constraint of their budget.