Which of the following is the best example the income effect of a price change?
A) When Gary's income doubles, his wine consumption doubles, the price of wine remaining unchanged.
B) When the price of diesel falls, consumers start purchasing more petroleum-powered vehicles.
C) While purchasing shirts and jeans, when the price of a pair of jeans falls, Jack purchases more of both jeans and shirts.
D) While purchasing pens and pencils, when the price of pens falls, Jill purchases more pens and fewer pencils.

Question

Quizplus · Accepted Answer

The income effect occurs when a price change affects the consumer's real income and thus their purchasing power. In option C, the fall in the price of jeans effectively increases Jack's real income, allowing him to purchase more of both jeans and shirts.

Which of the Following Is the Best Example the Income