Asked by
EDGARDO MEDINA
on Dec 16, 2024Verified
The income effect refers to the impact of a change in:
A) money income of consumers on the price of a good.
B) the relative price of a good on the demand for other goods.
C) the price of a good on a consumer's real income.
D) the price of a substitute good on a consumer's budget.
E) money income of consumers on the demand for a good.
Income Effect
The change in an individual's or economy's income and how that change affects the quantity demanded of a good or service.
Real Income
Income of individuals or nations after adjusting for inflation, representing the actual buying power of the income.
Money Income
Income measured in terms of money received from employment, investments, or other sources, rather than in terms of goods or services.
- Understand the relationship between price changes and consumer demand (income effect, substitution effect).
Verified Answer
HG
Learning Objectives
- Understand the relationship between price changes and consumer demand (income effect, substitution effect).