Answered

Match the type of effect to the description. The income effect
O When the price of a good rises, consumers use more of that good and less of other goods
O When the price of a good rises, consumers use less of that good and more of other goods
People change their purchase and use of goods and services because of a change in their
income.



Answer :

GinnyAnswer

Final answer:

The income effect and substitution effect play integral roles in consumer decision-making influenced by price changes.


Explanation:

Income effect: This effect occurs when a change in the price of a good leads to a change in the consumer's purchasing power or buying power, influencing their consumption of goods and services.

Substitution effect: Contrary to the income effect, this effect happens when a price change prompts consumers to adjust their consumption by substituting towards goods that are relatively cheaper.

Price elasticity: This concept is crucial in understanding how responsive consumer demand is to changes in price, affecting consumer behavior and market dynamics.


Learn more about Income effect and Substitution effect here:

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