Fred buys more baseball tickets and more t-shirts when the price of baseball tickets decreases. What explains why Fred buys more t-shirts?
A) the income effect because Fred's purchasing power increased
B) the income effect because Fred's purchasing power hasn't changed
C) the substitution effect because the price of t-shirts decreased relative to the price of baseball tickets
D) the substitution effect because baseball tickets and t-shirts must be substitute goods

Question

Quizplus · Accepted Answer

The income effect explains why Fred buys more t-shirts because the decrease in the price of baseball tickets effectively increases his purchasing power, allowing him to afford more of other goods, including t-shirts.

Fred Buys More Baseball Tickets and More T-Shirts When the Price