The Income Effect of a Price Change Refers to the Change

question 9

True/False

The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in purchasing power as a result of the price change.

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Definitions:

Externalities

Costs or benefits that affect a party who did not choose to incur that cost or benefit.

Consumer Surplus

The difference in the total amount expected to be paid by consumers for a good or service and the actual payment made.

Willingness to Pay

Willingness to Pay is the maximum amount an individual or organization is ready to spend to procure a product or service, reflecting the value they attach to it.

Market Failure

A scenario in which the distribution of goods and services through a free market fails to be efficient, typically resulting in a decrease in overall social welfare.