When the price of a product falls,the purchasing power of our money income rises and thus permits consumers to purchase more of the product.This statement describes:

A) an inferior good.
B) the rationing function of prices.
C) the substitution effect.
D) the income effect.

Question

Ashton Farmer · Accepted Answer

Final Answer : D, Explanation :  The statement describes the income effect, which refers to the change in quantity demanded of a product due to a change in the consumer's real income caused by a change in the product's price. When the price falls, the consumer's real income increases, allowing them to purchase more of the product. This is known as the income effect.

When the price of a product falls,the purchasing power of our money income rises and thus permits consumers to purchase more of the product.This statement describes:

A) an inferior good.
B) the rationing function of prices.
C) the substitution effect.
D) the income effect.

Definitions

Learning Objectives

Learning Objectives

Related questions

When the price of a product falls,the purchasing power of our money income rises and thus permits consumers to purchase more of the product.This statement describes:A) an inferior good.B) the rationing function of prices.C) the substitution effect.D) the income effect.

Definitions

Learning Objectives

Learning Objectives

Related questions

When the price of a product falls,the purchasing power of our money income rises and thus permits consumers to purchase more of the product.This statement describes:

A) an inferior good.
B) the rationing function of prices.
C) the substitution effect.
D) the income effect.