Use the following to answer questions:
Figure: Music and Movie Downloads 5
-(Figure: Music and Movie Downloads 5) Refer to the figure. The consumer in this diagram is initially optimizing consumption at point A than moves to point B. The income effect of the price change causes the consumer to:
A) increase the number of music downloads by 3.
B) increase the number of music downloads by 4.
C) reduce the number of music downloads by 1.
D) reduce the number of music downloads by 3.

Question

Use the following to answer questions:
Figure: Music and Movie Downloads 5 
-(Figure: Music and Movie Downloads 5) Refer to the figure. The consumer in this diagram is initially optimizing consumption at point A than moves to point B. The income effect of the price change causes the consumer to:
A) increase the number of music downloads by 3. 
B) increase the number of music downloads by 4. 
C) reduce the number of music downloads by 1. 
D) reduce the number of music downloads by 3.

Quizplus · Accepted Answer

The income effect refers to the change in consumption resulting from a change in real income. If the consumer moves from point A to point B and reduces the number of music downloads by 1, it indicates that the income effect of the price change has led to a decrease in the consumption of music downloads.

Use the Following to Answer Questions