The ________ effect of a price change refers to the impact a change in the price of a good has on a consumer's purchasing power.
A)income
B)substitution
C)demographics
D)ceteris paribus

Question

Quizplus · Accepted Answer

The income effect of a price change refers to the impact that a change in the price of a good has on a consumer's purchasing power, as their income will go further or have less value depending on the change in price. When the price of a good decreases, a consumer's purchasing power increases, leading to an increase in the quantity demanded of the good. Conversely, when the price of a good increases, a consumer's purchasing power decreases, leading to a decrease in the quantity demanded of the good. This is why the income effect is considered one of the main factors influencing the demand curve.

The ________ Effect of a Price Change Refers to the Impact