contestada

What best describes the income effect? Select the correct answer below: The state in which the ratio of the prices of goods is equal to the ratio of the marginal utilities. The idea that consumers replace costly goods with more affordable goods as prices change. The idea that a higher price means the buying power of income has been reduced. A decision to consume a specific combination of goods to optimize satisfaction.

Respuesta :

Answer:

The correct answer is letter "C": The idea that a higher price means the buying power of income has been reduced.

Explanation:

The Income Effect is the change in consumer consumption triggered by a shift in income, whether income rises or falls. The income effect can be direct or indirect. It is indirect when the consumption of certain goods decreases as the income decreases and indirect when the price of certain goods rise but as the income remains at the same level indirectly the income will be decreased.

Otras preguntas