The income effect of a price change is the change in consumption that results from the movement to a different indifference curve.

Question

Quizplus · Accepted Answer

The income effect is the change in consumption resulting from a change in real income due to a price change, holding constant the level of utility. The substitution effect is the change in consumption resulting from the movement to a different indifference curve due to a price change, holding constant real income. So, the statement in the question is referring to the substitution effect, not the income effect.

The Income Effect of a Price Change Is the Change