What Is the Income Effect of an Increase in the Price

question 132

Multiple Choice

What is the income effect of an increase in the price of peaches?

• A)The change in the quantity demanded of peaches that results from the price increase making peaches more expensive than other fruit, holding constant the effect of the price change on consumer purchasing power.
• B)The change in the demand for peaches as a result of the change in the price of peaches, holding all other factors constant.
• C)The change in the quantity demanded of other fruit that results from the impact of the price change on purchasing power, holding all other factors constant.
• D)The change in the quantity demanded of peaches that results from the effect of the change in price on consumer purchasing power, holding all other factors constant.

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Definitions:

Lamp Shades

Covers used to diffuse the light from a lamp, often decorative and used to control the lighting ambiance of a room.

Exchange

A process by which two parties come to a mutual agreement to trade goods, services, or information.

Store

A retail establishment where goods and services are sold to consumers.

Money

A medium of exchange that allows people to purchase goods and services; it serves as a unit of account, a store of value, and a standard of deferred payment.