When the price of audio books, a normal good, falls, causing your purchasing power to rise, you buy more of them due to
A)the substitution effect.
B)the income effect.
C)the deadweight loss effect.
D)the elasticity effect.

Question

Quizplus · Accepted Answer

The income effect explains that when the price of a normal good falls, the purchasing power of the consumer increases. This increase in purchasing power leads to an increase in the quantity demanded of that good. Therefore, when the price of audio books falls, you buy more of them due to the income effect.

When the Price of Audio Books, a Normal Good, Falls