As a result of the superb economics essay that you wrote during this quarter,you win the Adam Smith prize of $100.The receipt of these funds would be an example of
A)the substitution effect being stronger than the income effect.
B)the income effect being stronger than the substitution effect.
C)a pure income effect.
D)a pure substitution effect.

Question

Quizplus · Accepted Answer

The receipt of the $100 prize represents a pure income effect, as it directly increases the consumer's purchasing power and allows them to purchase more goods and services without any change in their relative prices. The substitution effect and income effect both occur when the price of a good changes, but in this scenario, the price has not changed.

As a Result of the Superb Economics Essay That You