What are the two effects a consumer experiences from a change in the price
A)the income effect and the budget effect
B)the complement effect and the substitute effect
C)the price effect and the preference effect
D)the income effect and the substitution effect

Question

Quizplus · Accepted Answer

A consumer experiences the income effect, which is the change in purchasing power due to a change in price, and the substitution effect, which is the change in quantity demanded due to a change in relative prices of two goods. Therefore, the best choice is D.

What Are the Two Effects a Consumer Experiences from a Change