substitution effect on law of demandwhen price of


Substitution Effect on law of demand

When price of a commodity falls it becomes comparatively cheaper if price of all other related goods, particularly of substitutes, remain constant. Or we can say substitute goods become comparatively costlier. Because consumers substitute cheaper goods for costlier ones, demand for comparativelycheaper commodity increases. The increase in demand on account of this factor is called substitution effect.

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Managerial Economics: substitution effect on law of demandwhen price of
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