You can spend $10 for lunch and you would like to purchase two cheeseburgers. When you get to the restaurant, you find out the price for cheeseburger has increased from $5 to $6, so you decide to purchase just one cheeseburger. This is best described as:
A)the substitution effect of a price change.
B)the income effect of a price change.
C)a decrease in the buyer's reservation price.
D)an increase in the buyer's reservation price.

Question

Quizplus · Accepted Answer

The purchasing power of your $10 has now fallen due to the higher price, so you purchase less of the good.

You Can Spend $10 for Lunch and You Would Like