Respuesta :
When the price of goods rises, consumers buy a smaller quantity because of the substitution effect and the income effect.
In consumer choice theory, the income effect and substitution effect are related economic concepts.
The substitution effect illustrates how a change in relative pricing can alter the pattern of consumption of related commodities that can substitute for one another, whereas the income effect expresses the influence of changes in purchasing power on consumption.
The income effect is an expression of how changes in relative market prices and incomes impact consumption patterns for consumer goods and services.
Consumer choice theory links preferences to consumption expenditures and consumer demand curves. When real consumer income increases, consumers will desire more of the typical economic items to buy.
For instance, as a product's price increases, it gets more expensive when compared to other products on the market. As a result, consumers start using its alternatives instead of the good.
Hence, the correct answer is substitution effect and income effect.
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