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Question
When increase in his Real Income induces a Consumer to buy more of a Commodity whose prices has fallen, it is called -
When increase in his Real Income induces a Consumer to buy more of a Commodity whose prices has fallen, it is called -
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Solution
The correct option is C Income Effect
The income
effect expresses the impact of increased
purchasing power on consumption, while the substitution effect describes how
consumption is impacted by changing relative income and prices.
... Some products, called inferior goods, generally decrease in consumption
whenever incomes increase.
The income effect expresses the impact of increased purchasing power on consumption, while the substitution effect describes how consumption is impacted by changing relative income and prices. ... Some products, called inferior goods, generally decrease in consumption whenever incomes increase.
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