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alukav5142 [94]
3 years ago
12

if General-Mills significantly raises the price of Professor Groth's favorite cereal, Cinnamon Toast Crunch, Professor Groth wil

l probably buy a different cereal, since there are many different breakfast cereals on the market. Which concept does this example illustrate?
Business
1 answer:
FromTheMoon [43]3 years ago
3 0

Answer:

The substitution effect

Explanation:

Substitution effect occurs when consumers change the products they buy when prices increase. Substitutes are products that can be used interchangeably.

So when the price of a particular good increases consumers tend to look for an alternative (substitute) that will serve the same purpose.

In the given scenario Professor Groth has a favourite cereal, Cinnamon Toast Crunch.

As the price of this cereal increases the Professor is looking at replacing it with other cereals. This is the substitution effect.

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