SUBSTITUTION EFFECT: One of two reasons for law of demand and the negative slope of the market demand curve (the other is the income effect). The substitution effect occurs because a change in the price of a good makes it relatively higher or lower than the prices of other goods that might act as substitutes. A higher price means that a good is more expensive relative to other goods, while a lower price means it's less expensive.

     See also | demand | demand curve | law of demand | slope | quantity demanded | income effect | demand price | substitute |

SUBSTITUTION EFFECT, AmosWEB GLOSS*arama, http://www.AmosWEB.com, AmosWEB LLC, 2000-2026. [Accessed: June 9, 2026].

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A type of economy, or economic system, based on--(1) government, rather than individual, ownership of many resources, especially those like heavy manufacturing, energy reserves, widely used raw materials (lumber, steel), and transportation systems, that are deemed critical to the operation of the economy; (2) answering three questions of allocation with a combination of central planning by government and decentralized decision-making by individual factories and the owners of non-critical resources; (3) the limited use of markets to exchange farm products and retail consumer goods; (4) economic and monetary incentives, such as bonuses, paid to the workers of government-owned facilities to encourage efficiency and increased productivity.

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