As someone's income rises,eventually their

A) income effect will outweigh their substitution effect.
B) substitution effect will outweigh their income effect.
C) their substitution and income effects will attain permanent equality.

Question

Natasha Mutesi · Accepted Answer

Final Answer : A, Explanation :  The income effect describes how an increase in someone's income affects their purchasing behavior, typically leading them to buy more of a good. The substitution effect occurs when a person changes their consumption of goods in response to changes in relative prices, substituting cheaper goods for more expensive ones. As income rises, the income effect often outweighs the substitution effect because the individual can afford to buy more goods overall, regardless of relative price changes.

As someone's income rises,eventually their

A) income effect will outweigh their substitution effect.
B) substitution effect will outweigh their income effect.
C) their substitution and income effects will attain permanent equality.

Definitions

Learning Objectives

Learning Objectives

Related questions

As someone's income rises,eventually theirA) income effect will outweigh their substitution effect.B) substitution effect will outweigh their income effect.C) their substitution and income effects will attain permanent equality.

Definitions

Learning Objectives

Learning Objectives

Related questions

As someone's income rises,eventually their

A) income effect will outweigh their substitution effect.
B) substitution effect will outweigh their income effect.
C) their substitution and income effects will attain permanent equality.