Consumer Theory

Consumer theory is a branch of microeconomics that studies the variables that affect purchasing decisions. It covers factors such as budget constraints, utility, and product choice – looking at how these affect the final consumers decision making.

Substitution Effect: Definition & Example

Paul Boyce / Posted in Consumer Theory /

The substitution effect occurs when consumers switch to substitute goods as prices rise. For example, if the price of chicken increases, then consumers may start to switch to substitute goods such as beef or pork.

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