Question

select the correct answer.
which phrase describes the substitution effect?
a. buying cheaper alternatives when a product becomes expensive
b. replacing existing producers in a market with new producers
c. replacing existing products in a market with higher - quality products
d. substituting existing technology with a new technology to produce more goods

Explanation:

The substitution effect in economics refers to the change in consumption of a good as a result of a change in its relative price (while keeping real income constant). When a product becomes expensive, consumers tend to buy cheaper alternatives, which matches option A. Option B is about producer substitution, not the substitution effect on consumers. Option C is about product quality - based substitution, not price - driven. Option D is about technological substitution in production, not consumer - side substitution effect.

Answer:

A. buying cheaper alternatives when a product becomes expensive