-The income effect and the substitution effect offset each other at point

Question

Quizplus · Accepted Answer

The income effect and the substitution effect offset each other at point J because at this point, the price of the good has decreased, which leads to an increase in the quantity demanded due to the substitution effect. However, the decrease in price also leads to a decrease in the consumer's real income, which leads to a decrease in the quantity demanded due to the income effect. The two effects offset each other at point J, resulting in no change in the quantity demanded.

-The Income Effect and the Substitution Effect Offset Each Other