Principles of Microeconomics / Unit 5 MIC 0412 short lesson, about 20 seconds
The Substitution Effect
Captions available
The idea
When a good's price rises it becomes dearer relative to other goods, so the consumer shifts toward substitutes. That change, holding purchasing power fixed, is the substitution effect.
In practice
Dearer oranges send a fruit buyer toward apples.
Where people slip
The substitution effect always moves quantity opposite to the price, for every good, normal or inferior.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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