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Summary

What is the Substitution Effect? Meaning.

The Substitution Effect is an economic term that refers to the phenomena that people are inclined to switch some of their consumption from similar products BCD to a product A if the price from product A falls.

In other words it is the portion of the effect of price on the demanded quantity that reflects the changed tradeoff between product A and other alternatives BCD.

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Compare with: Income Effect | Marketing Mix | Inferior Goods

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