Asked by Nardus Snyman on Jul 24, 2024
Verified
The income effect of a price increase for a normal good causes an increase in the consumption of the good.
Income Effect
A change in the quantity demanded of a product that results from the change in real income (purchasing power) caused by a change in the product’s price.
Normal Good
A good or service whose consumption increases when income increases and falls when income decreases, price remaining constant.
- Comprehend the impact of price changes on consumer demand through income and substitution effects.
Verified Answer
SB
Sadie BuchananJul 26, 2024
Final Answer :
False
Explanation :
The income effect of a price increase for a normal good typically causes a decrease in the consumption of the good, as the consumer's purchasing power is effectively reduced, making them less able to afford the good.
Learning Objectives
- Comprehend the impact of price changes on consumer demand through income and substitution effects.
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