In general,changes in the price of a good:
A)causes a substitution effect only.
B)causes an income effect only.
C)causes both an income and substitution effect.
D)usually has no effect.

Question

Quizplus · Accepted Answer

Changes in the price of a good usually cause both an income and a substitution effect. The substitution effect refers to the change in quantity demanded when consumers switch to a cheaper alternative, while the income effect refers to the change in quantity demanded based on changes in purchasing power or income. Therefore, both effects are usually present when there is a change in the price of a good.

In General,changes in the Price of a Good