When the Price of a Good Falls, the Income Effect

question 264

Multiple Choice

When the price of a good falls, the income effect for a normal good implies that people buy

• A) less of that good because they cannot afford to buy all the things they previously bought.
• B) more of that good because the relative price of the good has risen.
• C) more of that good because they can afford to buy more of all the things they previously bought.
• D) less of that good because the relative price of the good has fallen.

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