Figure 6.5 Manuri has $300 to spend on Pilates classes and Yoga classes.The price of a group Pilates class is $20 and the price of a group Yoga class is $10.Manuri's optimal bundle is given by 'A' in Figure 6-5.
-Refer to Figure 6.5.Suppose the price of Pilates sessions rises to $30 while income and the price of Yoga sessions remain unchanged.The income effect of this price change is represented by the movement from

Question

Figure 6.5  Manuri has $300 to spend on Pilates classes and Yoga classes.The price of a group Pilates class is $20 and the price of a group Yoga class is $10.Manuri's optimal bundle is given by 'A' in Figure 6-5.
-Refer to Figure 6.5.Suppose the price of Pilates sessions rises to $30 while income and the price of Yoga sessions remain unchanged.The income effect of this price change is represented by the movement from

Quizplus · Accepted Answer

The income effect of a price change refers to the change in consumption that results from the change in purchasing power due to the price change, holding utility constant. Moving from D to C isolates the income effect because it shows how consumption adjusts when the price of Pilates sessions increases, reducing real income or purchasing power, assuming income and the price of Yoga sessions remain unchanged.

Figure 65 Manuri Has $300 to Spend on Pilates Classes