Substitution Effect

The substitution effect refers to how consumers change their purchasing behavior when the price of a good changes. When the price of a product rises, people tend to buy less of it and seek alternatives that are cheaper. Conversely, if a product's price falls, it may attract more buyers, and they might purchase less of the substitutes. This effect illustrates how consumers make decisions based on relative prices, allowing them to maximize their satisfaction and value for money. Essentially, it's about choosing different options when prices fluctuate.