Which of the following replaces a costly item with a less costly one?

The substitution effect describes how consumers react to a change in the price of a good or service by opting for a less expensive alternative when available. This phenomenon occurs because, when the price of a particular item rises, consumers seek to maximize their utility by substituting the more expensive item with a similar but cheaper one.

For example, if the price of beef increases, consumers might purchase chicken or pork instead, as these alternatives serve similar purposes in meals but are more affordable. Therefore, the substitution effect is a fundamental concept in economics that illustrates how shifts in price influence consumer behavior, particularly in their choices among competing goods.

In contrast, the other options focus on different aspects of consumer decision-making. The income effect relates to how changes in a consumer's real income, due to price changes, affect their purchasing power and, subsequently, their consumption choices. A change in demand refers to shifts in the overall demand for a product, which may arise from various factors, while consumer taste reflects individual preferences that influence purchasing decisions but do not necessarily hinge on price changes.