Answer to Question #237247 in Economics for CCW

Question

Demand Review: (pick one in parentheses)

8) “Substitution effect” says that when prices drop like for the iPad substitute goods like the Galaxy Tab become relatively (cheaper/more expensive) and (more/fewer) iPads are bought.

Answer 1

The substitution effect is characterized by the appearance on the market of cheaper goods of those categories that are familiar to a person, and he begins to purchase exactly them, often refusing to buy previous products and replacing them with more affordable ones.