Which of the following best describes the income effect of a price increase? a. The tuition at the public university increases, so Michelle attends a community college. b. The price of bacon increases, so Michelle buys more sausage. c. The price of corn chips increases, so Michelle buys potato chips. d. Michelle’s apartment rent increases, so she moves to a smaller apartment. e. Michelle's apartment rent increases, so she cancels her subscription to a monthly magazine.

When there is a price increase, all the prices go up, so if you are thinking about changing what you buy, its actually useless because all the products had the same price increase. What actually changes is the amount of money you need to buy certain things. If Michelle payed 700 dollars in rent for her apartment and now they increase it to 900, she will have to find a place where the rent is 700 dollars, which probably will be a smaller apartment or maybe in a worst neighborhood. What changes with price increase is related to the fact that you don't make more money when the price increases, so you have to find worst solution with the same amount you used to spend.

emilyermer emilyermer · Answer 2 · 2020-05-16T20:24:45+02:00

emilyermer emilyermer

16-05-2020

Answer:

b

Explanation:

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