A price increase has two effects on the quantity of a good demanded: consumers switch to...

 

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A price increase has two effects on the quantity of a good demanded: consumers switch to relatively less expensive goods (holding utility and other prices constant) and less goods are demanded because purchasing power and the opportunity set has been reduced. What are the two effects on quantity demanded called? Does the quantity demanded of a good typically fall when its price rises? Does the quantity demanded of a good always have to fall when its price rises? Explain. A A price increase has two effects on the quantity of a good demanded: consumers switch to relatively less expensive goods (holding utility and other prices constant) and less goods are demanded because purchasing power and the opportunity set has been reduced. What are the two effects on quantity demanded called? Does the quantity demanded of a good typically fall when its price rises? Does the quantity demanded of a good always have to fall when its price rises? Explain. A

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The two effects on quantity demanded when the price of a good increases are called the income effect ... View the full answer