InterviewSolution
Saved Bookmarks
InterviewSolution
| 1. |
The total effect of a price change of a commodity is |
|
Answer» Substitution EFFECT plus income effect The total effect of a price CHANGE of a commodity is substitution effect plus income effect. The income effect is the change in consumption patterns due to a change in purchasing power. This occurs with income increases, price changes, and even currency fluctuations. SINCE income is not a good in and of itself (it can only be exchanged for GOODS and services), price DECREASES increase purchasing power. |
|