How to explain The substitution effect is positive(1)?
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How to explain The substitution effect is positive(1)?
The substitution effect is positive because it describes the increase in demand for a substitute good when the price of another good increases. As the price of a good increases, consumers tend to switch to a substitute good that is relatively cheaper, leading to an increase in demand for the substitute good. This can result in an overall increase in consumer welfare as consumers are able to purchase more of the substitute good at a lower price. Additionally, the increase in demand for the substitute good can lead to increased competition and innovation in the market, further benefiting consumers.
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