Asked by
pablo escobar
on Dec 11, 2024
Verified
According to the income effect, when the price of automobiles rises, people buy fewer automobiles because
A) they substitute other forms of transportation for driving.
B) the nominal amount of their paychecks is smaller.
C) the purchasing power of their income is reduced.
D) their demand for automobiles is very elastic.
Income Effect
The change in an individual's or economy's income and how that change will impact the quantity demanded of a good or service.
Purchasing Power
The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy.
- Understand the impact of price fluctuations on consumer choices via the substitution and income effects.
Verified Answer
NP
Learning Objectives
- Understand the impact of price fluctuations on consumer choices via the substitution and income effects.