A change in the relative prices of which of the following pair of goods would likely cause the smallest substitution effect ?
Correct answer: A. right shoes and left shoes
- A. right shoes and left shoes
- B. petrol from BP and petrol from shell
- C. kit-Kat chocolate snacks and Twix chocolate snacks
- D. coke and Pepsi
Explanation
Right and left shoes are strong complements because one has little use without the other. A relative-price change therefore produces little substitution toward one shoe and away from the other.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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