According to the income effect, an increase in the price of oranges will:

Question

Quizplus · Accepted Answer

The income effect states that when the price of a good increases, consumers will have less real income to spend on all goods. Therefore, choice D is the correct answer as it describes the impact of an increase in the price of oranges on consumers' purchasing power. Choice A is incorrect because it suggests that consumers will switch to buying more of a substitute good, which is actually the substitution effect. Choice B is incorrect because it suggests that the higher price of oranges will make consumers believe that oranges are better than apples, which is not necessarily true. Choice C is also incorrect because while it describes the substitution effect, it does not address the income effect.

According to the Income Effect, an Increase in the Price