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?

answer choices

the substitution effectthe income effectan increase in the demand for Nike soccer ballsthe price effect

Substitution effect

Explanation:

The law of demand states an inverse relationship between price of a good and it's demand implying, if price of a good rises, keeping other factors affecting demand constant, the demand for the good falls.

There exists a direct relationship between price a good and the demand for it's substitute. This means if price of a good falls, the demand for it's substitute shall fall and vice versa.

In the given case, Nike and Adidas soccer balls are perfect substitutes. When price of Nike fell, it's demand rose and lesser Adidas balls were purchased than earlier. This is termed as Substitution Effect.