Question

question 2 (2 points) which of the following scenarios occurs with the substitution effect? a) consumers replace a more expensive good with a cheaper alternative. b) income increases, and consumers buy more of all goods. c) total utility decreases as more of a good is consumed.

Explanation:

The substitution effect occurs when consumers change their consumption of goods due to a change in relative prices. When a good becomes relatively more expensive compared to its substitutes, consumers replace it with a cheaper alternative. Option b is related to the income - effect, and option c is about the law of diminishing marginal utility.

Answer:

A. Consumers replace a more expensive good with a cheaper alternative.