Asked by Zheng Casey on Jun 30, 2024
Verified
The income effect of a price change is the effect on consumption changes as a result of a change in:
A) income when all prices change in the same proportion.
B) purchasing power caused by a change in the price of the good.
C) income caused by a change in the price of labor.
D) income sufficient to offset the effect of a price change.
Purchasing Power
The quantity of goods or services that a person or entity can buy with a given amount of currency.
Income Effect
Income Effect describes how a change in an individual's income affects their purchasing behavior, impacting the quantity of goods and services they can afford.
Price Change
A variation in the cost of a good or service over time in a market.
- Understand the concept of income and substitution effects and their impact on consumer choices.
Verified Answer
Learning Objectives
- Understand the concept of income and substitution effects and their impact on consumer choices.
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