When the price of a given product declines, the consumer's spendable income rises because it takes less income to purchase the same quantity. This is called the:
A) net export effect.
B) income effect.
C) substitution effect.
D) interest effect.

Question

Quizplus · Accepted Answer

When the price of a good decreases, consumers can buy more of it with the same amount of money. This means that they have more money left over to spend on other goods and services, which increases their spendable income. This is known as the income effect.

When the Price of a Given Product Declines, the Consumer's