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When the price of Nike soccer balls fell, Ronaldo purchased more Nike soccer balls, and fewer Adidas soccer balls. Which of the following best explains Ronaldo's decision to buy more Nike soccer balls? A.the substitution effect B. the income effectC. an increase in the demand for Nike soccer balls D. the price effect

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Answer:

The correct answer is (A)

Explanation:

Nike and Adidas are considered as substitute goods that means they have positive cross elasticity of demand. When the price of Nike soccer balls fell, Rolando purchased more Nike balls compared to Adidas balls because of the substitution effect. The substitution effect led to this decision. A substitute effect is a change in the purchase decision, due to an increase in the price of one substitute good.

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