Question

When the price of good 1 changes ceteris paribus, a consumer will be motivated to consume a different market basket than they were consuming. Economists say that that this price change has two "effects." One is known as the preference effect; this happens because preferences change as prices change the supply effect; because the change in price would be due to a change in supply the substitution effect; because now the consumer wouldn't have to reduce their consumption of other goods as much in order to consume more good 1 when the price of good 1 goes down the demand effect; because a person naturally wants to buy more of a good when it's cheaper

          When the price of good 1 changes ceteris paribus, a consumer will be motivated to
consume a different market basket than they were consuming. Economists say that
that this price change has two "effects." One is known as
the preference effect; this happens because preferences change as prices
change
the supply effect; because the change in price would be due to a change in
supply
the substitution effect; because now the consumer wouldn't have to reduce their
consumption of other goods as much in order to consume more good 1 when
the price of good 1 goes down
the demand effect; because a person naturally wants to buy more of a good
when it's cheaper

When the price of good 1 changes ceteris paribus, a consumer will be motivated to
consume a different market basket than they were consuming. Economists say that
that this price change has two "effects." One is known as
the preference effect; this happens because preferences change as prices
change
the supply effect; because the change in price would be due to a change in
supply
the substitution effect; because now the consumer wouldn't have to reduce their
consumption of other goods as much in order to consume more good 1 when
the price of good 1 goes down
the demand effect; because a person naturally wants to buy more of a good
when it's cheaper

Added by Donna P.

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