alleryStart learning →The price effect equals the sum of which two effects?
ASupply and demand
BWealth and tax cuts
COutput and costs
DIncome and substitution
Answer & Solution
Correct answer: D. Income and substitution
Every price change can be decomposed into an income effect and a substitution effect.
Keep practising Theory of Consumer Behaviour
Browse all Theory of Consumer Behaviour questions for CA Foundation, or explore more Business Economics topics.
Related questions
Which assumption makes curves smooth and convex to the origin?The law of demand holds even when the consumer is compensated for a price rise. This is thConsumer theory derives demand curves using budget lines and what?The indifference curve idea in biology models what?Reluctance to spend on luxuries beyond a set limit reflects what?An impulsive purchase is an example of what, per behavioural critics?Behavioural economists say consumers often use shortcuts called what?Traditionally, rational behaviour of a consumer means what?