When there is a change in purchasing power as a result of a change in the price of a good,economists call it
A) the real-income effect.
B) the substitution effect.
C) marginal utility.
D) diminishing marginal utility.
E) the consumer optimum.

Question

Quizplus · Accepted Answer

When the price of a good changes, it affects the consumer's purchasing power. The real-income effect refers to the change in the consumer's purchasing power that results from a change in the price of a good, which in turn affects the quantity demanded of the good.

When There Is a Change in Purchasing Power as a Result