According to the Income Effect, a Decrease in the Price

question 158

Multiple Choice

According to the income effect, a decrease in the price of a product leads to an increase in the quantity demanded because buyers:

• A) have an implicit reduction in income.
• B) have an implicit increase in income.
• C) purchase fewer substitute goods.
• D) purchase more substitute goods.

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Definitions:

Price of Y

The amount of money required to purchase a specific quantity of product Y or service Y.

Consumer's Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service and the total amount they actually do pay.

Net Increase

The overall rise in a particular number after all deductions or decreases have been considered.

Units of X

A term commonly used in economics and other disciplines to denote a quantity or amount of a particular good or service referred to as "X."