If a decrease in price results in only a small amount in savings,the enhanced purchasing power is effectively
A) equal to the substitution effect.
B) large.
C) greater than the substitution effect.
D) negative.
E) zero.

Question

Quizplus · Accepted Answer

If a decrease in price results in only a small amount of savings, it means that the price elasticity of demand is low. Therefore, the enhanced purchasing power will not result in a significant increase in the quantity of the good demanded, so the effect is effectively zero.

If a Decrease in Price Results in Only a Small