Question

When the price of audio books, a normal good, falls, causing your purchasing power to rise, you buy more of them due to

Answer 1

Answer:

The answer is C. Income Effect

Explanation:

Economists refer to income effect as an increase in purchasing power.

It is the change in quantity demanded for a commodity when income changes

For example, consumers tend to buy more of goods and services when their income rises or tend to buy more of a good and service when the price of a goods falls while the income remains constant. This causes the purchasing power (which is the amount of goods that can be purchased with a unit of currency) to rise.

Option A is wrong because substitution effect states that when the price of a good rises, consumer tends to purchase less. This centers on price while income effect centers on income