If the price of a good increases,what do consumers perceive,all else being equal
A)an increase in purchasing power if the good is an inferior good
B)an increase in income if the price increase occurs for a normal good
C)a decrease in purchasing power
D)a net gain in income if they increase consumption of some goods

Question

Quizplus · Accepted Answer

If the price of a good increases, consumers perceive a decrease in their purchasing power as they can buy less of the good with their given income. This is true for both normal goods and inferior goods. Option A is incorrect as an increase in price of an inferior good would lead to a decrease in demand and hence, no increase in purchasing power. Option B is incorrect as an increase in price does not necessarily result in an increase in income. Option D is also incorrect as there is no net gain in income when the price of a good increases.

If the Price of a Good Increases,what Do Consumers Perceive,all