ExamVeda
Login
Home
This question belongs to Commerce Economics
Economics
?

The total effect of a price change of a commodity is

Answer & Solution
Correct Answer: Option B
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.
Examveda
Question posted by Examveda
Community

Join the Discussion

No comments yet Be the first to discuss this question.