Figure 21-21
-Refer to Figure 21-21. Suppose that a consumer is originally at point R. Then the price of good X decreases. Which of the following represents the income effect of the price decrease?
A)the movement from point R to point S
B)the movement from point R to point T
C)the movement from point T to point S
D)None of the above is correct.

Question

Figure 21-21 
-Refer to Figure 21-21. Suppose that a consumer is originally at point R. Then the price of good X decreases. Which of the following represents the income effect of the price decrease?
A)the movement from point R to point S 
B)the movement from point R to point T 
C)the movement from point T to point S 
D)None of the above is correct.

Quizplus · Accepted Answer

The income effect is the change in consumption resulting from a change in real income. When the price of good X decreases, the consumer can afford to buy more of both goods, moving from point T to point S, reflecting the income effect.

Figure 21-21 -Refer to Figure 21-21. Suppose That a Consumer Is Originally