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An increase in the price of a product will reduce the amount of it purchased because: a
An increase in the price of a product will reduce the amount of it purchased because:
a. Supply curves are upsloping,
b. The higher price means that real incomes have risen,
c. Consumers will substitute other products for the one whose price has risen,
d. Consumers substitute relatively high-priced for relatively low-priced products.
Expert Solution
The correct answer to the given question is option c. Consumers will substitute other products for the one whose price has risen.
As per the demand curve, the quantity demanded for a product is inversely related to its price. Thus, an increase in the price of a product reduces its quantity demanded and a decrease in the price of a product increases its quantity demanded. As the price of a product increases, consumers usually tend to shift to substitute products which have similar characteristics but are relatively cheaper to purchase.
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