Which of the following describes the substitution effect?(1 point)

Question

Responses

As wages increase, an individual's leisure becomes more costly, making him less likely to choose leisure over labor. As the price of Coca Cola rises consumers purchase more Sprite.
As wages increase, an individual's leisure becomes more costly, making him less likely to choose leisure over labor. As the price of Coca Cola rises consumers purchase more Sprite.

As wages increase, an individual's total potential income rises, making him more likely to choose leisure over labor. A consumer buys more milk each time they purchase cereal.
As wages increase, an individual's total potential income rises, making him more likely to choose leisure over labor. A consumer buys more milk each time they purchase cereal.

As wages increase, an individual's total potential income rises, making him less likely to choose leisure over labor. As a consumer increases their income they purchase more desserts, a normal good.
As wages increase, an individual's total potential income rises, making him less likely to choose leisure over labor. As a consumer increases their income they purchase more desserts, a normal good.

As wages increase, an individuals leisure becomes less costly, making him more likely to choose leisure over labor. As hamburgers becomes cheaper consumers purchase more steak.
As wages increase, an individuals leisure becomes less costly, making him more likely to choose leisure over labor. As hamburgers becomes cheaper consumers purchase more steak.
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Answer 1

The substitution effect refers to the change in consumption patterns that occurs when a price change makes one good relatively cheaper than another, leading consumers to substitute one for the other.

Among the provided statements, the best one that describes the substitution effect is:

As wages increase, an individual's leisure becomes more costly, making him less likely to choose leisure over labor. As the price of Coca Cola rises consumers purchase more Sprite.

This statement captures the essence of the substitution effect in two parts: the idea that as the opportunity cost of leisure increases (due to higher wages), individuals may choose to work more (substituting labor for leisure), and the example of consumers switching from Coca Cola to Sprite when the price of Coca Cola increases, illustrating the substitution effect in consumption.