The income effect occurs when an individual switches to another similar good when the price of the preferred good increases.

Name: The income effect occurs when an individual switches to another similar good when the price of the preferred good increases.
Brand: Quizplus
Rating: 4.8 (37 reviews)

Question

Quizplus · Accepted Answer

The income effect refers to the change in consumption resulting from a change in real income, not a switch to another good. The substitution effect is responsible for switching to a similar good when the price of the preferred good increases.

The Income Effect Occurs When an Individual Switches to Another