Quinn's income to spend each month on two normal goods,bowling or eating out,is $100.It costs $10 to bowl for the night,and it costs $20 for Quinn to eat at a restaurant.Quinn currently consumes four nights of bowling and three meals at a restaurant.If the price of bowling increased to $15,the income effect would predict:
A)Quinn would consume less of each good.
B)Quinn would consume more of each good.
C)Quinn would consume more bowling and less meals out.
D)Quinn would consume less bowling and more meals out.

Question

Quizplus · Accepted Answer

The income effect suggests that when the price of a good increases, the consumer's purchasing power effectively decreases, leading them to consume less of both normal goods.

Quinn's Income to Spend Each Month on Two Normal Goods,bowling