Question

Suppose that Steve heads to the local hamburger shop with $3, expecting to spend $2 for his favorite burger and $1 for French fries. When he gets there he discovers that his favorite burger is on sale for $1, so he buys two burgers and one order of French fries. Steve's consumption behavior is best explained by?

Answer 1

Answer:

Income Effect

Explanation:

In economics, the effect of income is the shift in demand for a good or service caused by a change in the buying power of a customer stemming from a real earnings change.

The move may be the result of an increase in wages or because current income is released by a decrease or increase in a good's value on which money is spent.