-The income effect from a fall in the price of a gallon of gasoline is shown in the above figure by the movement from
A) point A to point C.
B) point A to point B.
C) point B to point C.
D) point A to point B and then to point C.

Question

-The income effect from a fall in the price of a gallon of gasoline is shown in the above figure by the movement from
A) point A to point C. 
B) point A to point B. 
C) point B to point C. 
D) point A to point B and then to point C.

Quizplus · Accepted Answer

The income effect is represented by the movement from point B to point C, as it shows the change in consumption due to the increased real income from the price decrease.

-The Income Effect from a Fall in the Price of a Gallon