Question

When the price of a good falls, and a consumer is able to buy more of it with the same income, this effect is called ______.

Options

• Income effect

• Substitution effect

• Price effect

• Cross effect

Answer 1

When the price of a good falls, and a consumer is able to buy more of it with the same income, this effect is called income effect.

Explanation:

Income effect means change in quantity demanded because a change in price makes the consumer feel richer or poorer with the same money income.