🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
HomeTextbook Notes300,000CA170,000

ECON 1050 Chapter 9: Economics-1 (1) (dragged) 3

38 views1 pages
salmoneagle674
17 Sep 2016
School
University of Guelph
Department
Economics
Course
ECON 1050
Professor
Eveline Adomait

For unlimited access to Textbook Notes, a Class+ subscription is required.

Document Summary

The effect of a change in income on the quantity of good consumed is called the income effect. The figure alongside illustrates the effect of a decrease in lisa"s income. Initially, lisa consumes at point j in part (a) and at point b on demand curve dd in part (b). Lisa"s income decreases and her budget line shifts leftward in part (a) Her new best affordable point is k in part (a) Her demand for movies decreases, shown by a leftward shift of her demand curve for movies in part (b) For a normal good, a fall in price always increases the quantity consumed. We can provide this assertion by dividing the price effect in two parts: substitution effect. Initially, lisa has an income of , the price of a movie is , and she consumes at point c. The price of a movie falls from to and her budget line rotates outward.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents

ECON 1050 Chapter 9: Chapter 9 - Possibilities, Preferences, and Choices
brownotter197
ECON 1050 Chapter 9: Economics-1 (1) (dragged) 4
salmoneagle674
ECON 1050 Chapter Notes - Chapter 8: Bounded Rationality, Economic Surplus, Spreadsheet
brownotter197

Related Questions

Which of the following that will occur when the price of normal good falls?

a. The income effect and the substitution effect will work to increase the quantity demanded of goods whose price decreases due to an increase in purchasing power.

b. The income and substitution effect will work towards decreasing the demand of consumers because the purchasing power will relatively decrease from the fall of the price.

c. The substitution effect expresses that the sales of goods whose price rises to increase.

d. None of the above.

 

13) The substitution effect is the effect of A) a change in income on the quantity bought when the consumer moves to a higher indifference curve. B) a change in price on the quantity bought when the consumer hypothetically remains on the same indifference curve. C) a change in income on the quantity bought. D) a change in the best affordable point. E) a change in price on the quantity bought when the consumer moves to a higher indifference curve.

28) The substitution effect is the effect of A) a change in income on the quantity bought. B) a change in price on the quantity bought when the consumer moves to a higher indifference curve. C) a change in income on the quantity bought when the consumer moves to a higher indifference curve. D) a change in the best affordable point. E) a change in price on the quantity bought when the consumer hypothetically remains on the same indifference curve.