6.2 Flashcards
(6 cards)
1
Q
What are the effects of changes in income or price on consumer choices?
A
Changes in income or price shift the budget constraint and affect consumer choices.
2
Q
What happens to consumer behavior when both goods are normal?
A
Consumers buy more of both goods as income increases.
3
Q
What happens to the consumption of an inferior good when income rises?
A
Consumers buy less of the inferior good when income rises.
4
Q
What is the substitution effect?
A
Consumers switch to a cheaper good when a price increases.
5
Q
What is the income effect?
A
A price increase reduces purchasing power, leading to lower overall consumption.
6
Q
What is the foundation of the demand curve?
A
As price changes, the budget constraint rotates, influencing demand.
