When the price of good X decreases, a consumer is able to consume more of good X, more of good Y, or both. This is called the:
A) precautionary principle.
B) substitution effect.
C) income effect.
D) marginal utility principle.

Question

Quizplus · Accepted Answer

The income effect describes a situation where a decrease in the price of a good increases the purchasing power of a consumer, allowing them to buy more of that good, more of another good, or both, as they effectively feel richer.

When the Price of Good X Decreases, a Consumer Is