Figure 21-20

-Refer to Figure 21-20.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 21-20
 
-Refer to Figure 21-20.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 represented by the movement from point T to point S, as it shows the change in consumption due to the increase in real income after the price decrease, holding utility constant.

Figure 21-20 -Refer to Figure 21-20.Suppose That a Consumer Is Originally at Consumer