With a temporary change in technology, we would expect:
A)the income effect of consumption to be larger.
B)the income effect of consumption to be smaller.
C)the intertemporal substitution effect on consumption to be larger.

Question

Quizplus · Accepted Answer

A temporary change in technology would lead to a decrease in the price of goods and services, leading to an increase in real income. However, as the change is temporary, consumers are unlikely to change their long-term consumption behavior, leading to a smaller income effect.

With a Temporary Change in Technology, We Would Expect