Steve went to his favorite hamburger restaurant with $3, expecting to buy a $2 hamburger and a $1 soda. When he arrived, he discovered that hamburgers were on sale for $1 each, so Steve bought two hamburgers and a soda. Steve's response to the decrease in the price of hamburgers is best explained by

Question

Quizplus · Accepted Answer

The income effect explains how a consumer's purchasing power increases when the price of a good decreases, allowing them to buy more of that good or other goods. In this case, Steve could afford two hamburgers and a soda due to the reduced price, effectively increasing his purchasing power.

Steve Went to His Favorite Hamburger Restaurant with $3, Expecting