Answer to Question #93797 in Microeconomics for Adrian Gwara

Question #93797

The income effect of a price decrease …
1. refers to the influence of real income changes rather than nominal income changes on consumer purchases.
2. refers to the influence of nominal income changes rather than real income changes on consumer purchases.
3. measures the effect of both real and nominal income changes on consumer purchases.
4. does not relate to changes in real or nominal income, but rather to the perception of change in the mind of the consumer

Expert's answer

The income effect of a price decrease refers to the influence of real income changes rather than nominal income changes on consumer purchases.

So, the correct answer is 1.