When an individual's purchasing power changes due to a change in the price of a good or service, this is referred to as
A) marginal effect.
B) real-income effect.
C) substitution effect.
D) utility effect.

Question

Quizplus · Accepted Answer

The change in purchasing power due to a change in the price of a good or service is referred to as the real-income effect. This effect occurs when the change in price of a good or service affects the consumer's purchasing power in real terms, meaning the amount of goods and services that can be purchased with a given income.

When an Individual's Purchasing Power Changes Due to a Change