substitution effect

Definition

A theory that states that purchasers of products or services will substitute to less expensive alternatives if either the price of their preferred product or service rises or if their income goes down. The opposite effect is also believed to be true.

Use substitution effect in a sentence

You may find that you can use the substitution effect to your advantage and find new ways to get your supplies.

​ Was this Helpful? YES  NO 11 people found this helpful.

The substitution effect was in play and we were all surprised that it actually worked like we thought it would.

​ Was this Helpful? YES  NO 9 people found this helpful.

The substitution effect was witnessed when the low cost brands entered the market and we were forced to raise our prices.

​ Was this Helpful? YES  NO 7 people found this helpful.

Show more usage examples...

Browse Definitions by Letter: # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
substitution bond swap substitution of collateral