Scenario 7-1
Use the information below to answer the following question(s).
JoAnn considers cola and plain sparkling water to be good substitutes.Suppose the price of sugar,a key ingredient used to produce cola,falls.
-Refer to Scenario 7-1.According to the income effect,which of the following is most likely to occur?
A)JoAnn will purchase less cola and more sparkling water.
B)JoAnn will purchase more cola and less sparkling water.
C)JoAnn will purchase more of most goods due to her higher real income.
D)JoAnn's demand curve will decrease (shift in),causing her to purchase less cola.

Question

Quizplus · Accepted Answer

The income effect suggests that when the price of a good falls, the consumer's real income effectively increases, allowing them to purchase more of most goods.

Scenario 7-1 Use the Information Below to Answer the Following Question(s)