The change in consumption that results when a price change moves the consumer along a given indifference curve to a point illustrating the new marginal rate of substitution is called the
A)income effect.
B)substitution effect.
C)Giffen good effect.
D)inferior good effect.

Question

Quizplus · Accepted Answer

The change in consumption resulting from a change in price that moves the consumer along a given indifference curve is called the substitution effect. The income effect, on the other hand, refers to the change in consumption resulting from a change in income, holding prices constant. The Giffen good effect and inferior good effect are both specific types of income effects that occur only for certain types of goods.

The Change in Consumption That Results When a Price Change