Suppose a consumer can purchase only two goods,soap and apples.If the price of soap falls and the consumption of apples increases,we can conclude that the increased consumption of apples is due to
A)neither the income effect nor the substitution effect.
B)both the income effect and the substitution effect.
C)the income effect only.
D)the substitution effect only.
E)the deflation effect.

Question

Quizplus · Accepted Answer

The income effect occurs when a price change affects the consumer's purchasing power, allowing them to buy more of both goods. Here, the fall in the price of soap increases the consumer's real income, enabling them to purchase more apples.

Suppose a Consumer Can Purchase Only Two Goods,soap and Apples