Exhibit 6-31 -Assume That a Consumer Is Initially in Equilibrium at Point

question 75

Multiple Choice

Exhibit 6-31
-Assume that a consumer is initially in equilibrium at point a in Exhibit 6-31. Then the price of good B falls. The movement from point a to point c represents

• A) the substitution effect
• B) the income effect
• C) the substitution effect minus the income effect
• D) the sum of the substitution and income effects
• E) the income effect minus the substitution effect

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Definitions:

Income Elasticity

A measure that quantifies the responsiveness of the demand for a good or service to a change in income of the people demanding the good.

Consumer Income

Consumer income is the total earnings of an individual from all sources, influencing their spending and saving behaviors.

Jewelry

Decorative items worn for personal adornment, such as rings, necklaces, earrings, and bracelets, often made from precious metals and stones.

Income Elasticity

A measure of how much the quantity demanded of a good responds to a change in consumers' incomes.