The correct answer is: C. Price effect = Income effect + Substitute effect.
The income effect is the change in the quantity demanded of a good due to a change in the consumer’s income. The substitution effect is the change in the quantity demanded of a good due to a change in the relative price of that good. The price effect is the sum of the income effect and the substitution effect.
For example, let’s say that a consumer’s income increases. This will lead to an increase in the demand for all goods, including the good in question. This is because the consumer can now afford to buy more of all goods. This is the income effect.
However, the increase in income will also lead to a change in the relative price of the good in question. This is because the consumer can now afford to buy more of other goods, which will make the good in question relatively more expensive. This will lead to a decrease in the demand for the good. This is the substitution effect.
The net effect of the
24.9-48.3 48.6-11.4 42.9-11.4 132.3-11.4 132.3s0 89.4 11.4 132.3c6.3 23.7 24.8 41.5 48.3 47.8C117.2 448 288 448 288 448s170.8 0 213.4-11.5c23.5-6.3 42-24.2 48.3-47.8 11.4-42.9 11.4-132.3 11.4-132.3s0-89.4-11.4-132.3zm-317.5 213.5V175.2l142.7 81.2-142.7 81.2z"/> Subscribe on YouTube