Question

Examine the given image. What does this image depict?

Options

• Income effect

• Substitution effect

• Price effect

• Law of demand

Answer 1

Substitution effect

Explanation:

This image depicts the substitution effect using Coca-Cola and Pepsi, two classic examples of alternative goods. It shows that when the price of one brand (such as Coca-Cola) rises, people migrate to a less expensive option, increasing demand for the substitute brand (Pepsi).