The income effect results in consumers increasing the quantity of normal goods demanded when the price falls.

Question

Quizplus · Accepted Answer

The income effect refers to the change in consumer demand for a product that occurs as a result of a change in the consumer's purchasing power, due to a change in the product's price. When the price of a normal good decreases, the consumer's purchasing power increases, leading to an increase in the quantity demanded of that good. This is known as the income effect. Therefore, the statement "The income effect results in consumers increasing the quantity of normal goods demanded when the price falls" is true.

The Income Effect Results in Consumers Increasing the Quantity of Normal