When the price of a good rises, consumers buy a smaller quantity because of the effect and the effect?

1 answer:

4 0

When the price of a good rises, consumers buy a smaller quantity because of the substitution effect and the income effect. A change in the relative prices of goods results in change in consumption of that goods and that is denoted as the substitution effect. T<span>he change in purchasing power on the other hand which also result in change in consumption is referred to as the income effect.</span>

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Milton friedman argued that consumers are more likely to alter their behavior based on.

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The Right Response is Option C which is Long Term Changes in the Economy.

<h3><u>Why Did Friedman Argued So?</u></h3>

The concept of monetarism, which refers to the management of money in the economy, was developed by Milton Friedman. According to Friedman, changes in the money supply can have both long- and short-term consequences.

Friedman suggested that long-term changes in the economy had an impact on consumer behavior. Long-term economic developments have an impact on how consumers behave while making purchases. For instance, if long-term economic trends are favorable, consumer spending will rise; otherwise, it would fall.

Therefore, "long-term changes in the economy" is the right response.

To learn more about Long Term Changes in the Economy. Click the links.

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Correct Question - Milton Friedman argued that consumers are more likely to alter their behavior based on

a) changes in the unemployment rate.

b) short-term changes in the economy.

c) long-term changes in the economy.

d) changes in the inflation rate.

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2 years ago

When the price of a good rises, consumers buy a smaller quantity because of the ________ effect and the ________ effect?

When the price of a good rises, consumers buy a smaller quantity because of the effect and the effect?