You regularly purchase two types of goods for your weekly groceries: generic brand cereal and premium brand cereal. Initially,
you buy them in equal amounts because they are priced the same. However, one week, the price of the premium brand cereal
increases significantly. As a result, you buy more generic brand cereal and less premium brand cereal than you did before.
Which of the following best explains your change in purchasing behavior?
Select one:
a. The income effect, because you now perceive the premium brand as a luxury and increase its consumption.
b. The income effect, because the price increase of the premium brand cereal has effectively reduced your purchasing
power, leading you to adjust your overall consumption.
c. The substitution effect, because you have substituted the premium brand cereal with the more affordable generic brand
due to the price increase.
d. There was no substitution or income effect, your preferences simply changed.