The Income Effect of a Price Change Is Described by Which

question 86

Multiple Choice

The income effect of a price change is described by which of the following statements?

• A) When the price of a good falls, consumers have an implicit increase in income and can now buy more of the good.
• B) When the price of a good falls, consumers will now substitute this lower priced good for more higher priced goods.
• C) The income effect is the relative change in the amount of a good consumed when the price of another good changes.
• D) The income effect shows how a change in income at a given price will affect the quantity of a good purchased.

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Definitions:

Irrelevant Information

Information that has no bearing on the current situation or decision-making process; it does not affect outcomes.

World Cup

An international football (soccer) competition held every four years among the national teams of FIFA member countries.

Behavioral Economists

Economists who study the impacts of psychological, cognitive, emotional, cultural, and social factors on economic decisions made by individuals and institutions.