61 861
Assignments Done
98,1%
Successfully Done
In May 2018

Answer to Question #34919 in Microeconomics for Terrence

Question #34919
How does the income effect influence consumer behavior when prices rise?
Expert's answer
The income effect is increase in consumption of the normal benefits as a result of the fall in its price due to the increase in real income caused by the reduction in price, and vice versa, reduction of the consumption of normal benefits as a result of its increase in price by reducing the real income caused by rising prices. If the buyer is able to choose between the two products, he will buy more of the goods, relative price of which has fallen, and less of the relative price of which has increased. As a result, when the price of A good increases in relation to the price of B good and at the same time the real income remains fixed, then the consumer will purchase fewer part of A goods and more of B ones.

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be first!

Leave a comment

Ask Your question

Submit
Privacy policy Terms and Conditions