Asked by
Sakariye barkhad
on Nov 04, 2024
Verified
For normal goods
A) the substitution and income effects of a price decrease will both decrease the quantity of the good demanded.
B) the substitution and income effects of a price decrease will both increase the quantity of the good demanded.
C) the substitution effect of a price decrease will increase the quantity of the good demanded while the income effect of a price decrease will decrease the quantity of the good demanded.
D) the substitution effect of a price decrease will decrease the quantity of the good demanded while the income effect of a price decrease will increase the quantity of the good demanded.
Substitution Effect
The change in consumption resulting from a change in the price of a product, leading consumers to substitute that product with another.
Income Effect
The change in an individual's or economy's income and how that change will impact the quantity demanded of a good or service.
- Recognize the influence of price adjustments on consumer preferences through the lens of substitution and income effects.
Verified Answer
BD
Learning Objectives
- Recognize the influence of price adjustments on consumer preferences through the lens of substitution and income effects.