The change in consumption of a good resulting from the implicit change in income because of a price change is called the _______ effect of a price change.
A) substitution
B) demand
C) price
D) income

Question

Quizplus · Accepted Answer

The income effect refers to the change in consumption resulting from the implicit change in income due to a price change. When the price of a good increases, consumers may have less discretionary income to spend on other goods, which decreases their purchasing power and the demand for the good.

The Change in Consumption of a Good Resulting from the Implicit