As the price of the dog food that Michelle feeds her dog falls, Michelle has more purchasing power. This is an example of the _____ effect.

Question

Quizplus · Accepted Answer

The income effect occurs when a change in the price of a good affects the purchasing power of a consumer, allowing them to buy more or less of that good or others. In this case, as the price of dog food falls, Michelle's purchasing power increases, illustrating the income effect.

As the Price of the Dog Food That Michelle Feeds