ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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consumer expectations
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consumer tastes
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income effect
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substitution effect
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Detailed explanation-1: -43) The income effect of a price change refers to the change in the quantity demanded of a good. that results from a change in purchasing power as a result of the price change.
Detailed explanation-2: -Because of the income effect, when prices rise, consumers feel “poorer” because the purchasing power of their incomes change, even though their actual incomes are not changing. The consumers’ incomes can buy them less of a product if the product’s price goes up, so consumers purchase less of it.
Detailed explanation-3: -An increase in the price of a good will increase demand for its substitute, while a decrease in the price of a good will decrease demand for its substitute.
Detailed explanation-4: -When the price of a product increases, a consumer’s real income decreases, causing the consumer to decrease the quantity of the product demanded. This is known as The Income Effect.