When the price of a product increases, a consumer is able to buy less of it with a given money income.This describes:

Question

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The given scenario is describing the income effect, which is the decrease in purchasing power due to an increase in the price of a product. Choice A, the cost effect, refers to the change in quantity demanded due to a change in the cost of producing the product. Choice B, the inflationary effect, refers to the overall increase in prices across an economy, which can impact multiple products. Choice D, the substitution effect, refers to the change in demand for a product due to a change in the price of a substitute product.

When the Price of a Product Increases, a Consumer Is