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Figure: Income and Substitution Effects
-(Figure: Income and Substitution Effects) Refer to the figure. The consumer is initially in equilibrium at Point A then moves to Point B. What is the income effect from the price change?
A) the increase of the number of music downloads by three
B) the increase of the number of music downloads by four
C) the reduction of the number of music downloads by one
D) the reduction of the number of music downloads by three

Question

Use the following to answer questions:
Figure: Income and Substitution Effects 
-(Figure: Income and Substitution Effects) Refer to the figure. The consumer is initially in equilibrium at Point A then moves to Point B. What is the income effect from the price change?
A) the increase of the number of music downloads by three 
B) the increase of the number of music downloads by four 
C) the reduction of the number of music downloads by one 
D) the reduction of the number of music downloads by three

Quizplus · Accepted Answer

The movement from Point A to Point B shows a decrease in the quantity consumed of music downloads, indicating a reduction in income due to the price increase. Therefore, the income effect is the reduction of the number of music downloads by one.

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