Exhibit A

-Refer to Exhibit A. Suppose that the consumer must choose between buying socks and belts. Also, suppose that the consumer's income is R1 000. Suppose that the price of a pair of socks has falls from R50 to R20. The income effect is represented by the movement from point?

Question

Exhibit A

-Refer to Exhibit A. Suppose that the consumer must choose between buying socks and belts. Also, suppose that the consumer's income is R1 000. Suppose that the price of a pair of socks has falls from R50 to R20. The income effect is represented by the movement from point?

Quizplus · Accepted Answer

When the price of socks falls from R50 to R20, the consumer's purchasing power increases (as they can buy the same amount of socks with less money) and they are able to afford both socks and belts. This results in the movement from point X to point Y, which represents the income effect. Therefore, the best choice is to buy both socks and belts, as the consumer's income and purchasing power allow for it.

Exhibit a -Refer to Exhibit A. Suppose That the Consumer Must Choose