As the price of gas goes up, Toni has less purchasing power. This is an example of the _____ effect.

Question

Quizplus · Accepted Answer

The income effect describes how changes in the price of goods or services affect consumers' purchasing power. In this case, as the price of gas increases, Toni's purchasing power decreases because a larger portion of her income is consumed by purchasing gas, leaving less money for other goods and services.

As the Price of Gas Goes Up, Toni Has Less