The income effect isolates the change in the consumption of a good caused by the change in:
A)"real" income.
B)relative prices of two goods.
C)consumer preferences.
D)none of the statements associated with this question are correct.

Question

Quizplus · Accepted Answer

The income effect measures the change in the consumption of a good caused by a change in real income, holding the relative prices of all goods constant. Therefore, choice A is correct. Choice B refers to the substitution effect, not the income effect. Choice C is not directly related to the income effect. Choice D is incorrect as the income effect is a well-established economic concept.

The Income Effect Isolates the Change in the Consumption of a Good